G.R. No.

L-15334

January 31, 1964

BOARD OF ASSESSMENT APPEALS, CITY

ASSESSOR and CITY TREASURER OF QUEZON
CITY,petitioners,
vs.
MANILA ELECTRIC COMPANY, respondent.
Assistant City Attorney Jaime R. Agloro for
petitioners.
Ross, Selph and Carrascoso for respondent.
PAREDES, J.:
From the stipulation of facts and evidence
adduced during the hearing, the following
appear:
On
October
20,
1902,
the
Philippine
Commission enacted Act No. 484 which
authorized the Municipal Board of Manila to
grant a franchise to construct, maintain and
operate an electric street railway and electric
light, heat and power system in the City of
Manila and its suburbs to the person or persons
making the most favorable bid. Charles M.
Swift was awarded the said franchise on March
1903, the terms and conditions of which were
embodied in Ordinance No. 44 approved on
March 24, 1903. Respondent Manila Electric Co.
(Meralco for short), became the transferee and
owner of the franchise.
Meralco's electric power is generated by its
hydro-electric plant located at Botocan Falls,
Laguna and is transmitted to the City of Manila
by means of electric transmission wires,
running from the province of Laguna to the

said City. These electric transmission wires

which carry high voltage current, are fastened
to insulators attached on steel towers
constructed by respondent at intervals, from its
hydro-electric plant in the province of Laguna
to the City of Manila. The respondent Meralco
has constructed 40 of these steel towers within
Quezon City, on land belonging to it. A
photograph of one of these steel towers is
attached to the petition for review, marked
Annex A. Three steel towers were inspected by
the lower court and parties and the following
were the descriptions given there of by said
court:
The first steel tower is located in South Tatalon,
Espaa Extension, Quezon City. The findings
were as follows: the ground around one of the
four posts was excavated to a depth of about
eight (8) feet, with an opening of about one (1)
meter in diameter, decreased to about a
quarter of a meter as it we deeper until it
reached the bottom of the post; at the bottom
of the post were two parallel steel bars
attached to the leg means of bolts; the tower
proper was attached to the leg three bolts; with
two cross metals to prevent mobility; there was
no concrete foundation but there was adobe
stone underneath; as the bottom of the
excavation was covered with water about three
inches high, it could not be determined with
certainty to whether said adobe stone was
placed purposely or not, as the place abounds
with this kind of stone; and the tower carried
five high voltage wires without cover or any
insulating materials.

The second tower inspected was located in

Kamuning Road, K-F, Quezon City, on land
owned by the petitioner approximate more
than one kilometer from the first tower. As in
the first tower, the ground around one of the
four legs was excavate from seven to eight (8)
feet deep and one and a half (1-) meters
wide. There being very little water at the
bottom, it was seen that there was no concrete
foundation, but there soft adobe beneath. The
leg was likewise provided with two parallel
steel bars bolted to a square metal frame also
bolted to each corner. Like the first one, the
second tower is made up of metal rods joined
together by means of bolts, so that by
unscrewing the bolts, the tower could be
dismantled and reassembled.
The third tower examined is located along
Kamias Road, Quezon City. As in the first two
towers given above, the ground around the two
legs of the third tower was excavated to a
depth about two or three inches beyond the
outside level of the steel bar foundation. It was
found that there was no concrete foundation.
Like the two previous ones, the bottom
arrangement of the legs thereof were found to
be resting on soft adobe, which, probably due
to high humidity, looks like mud or clay. It was
also found that the square metal frame
supporting the legs were not attached to any
material or foundation.
On November 15, 1955, petitioner City
Assessor of Quezon City declared the aforesaid
steel towers for real property tax under Tax
declaration Nos. 31992 and 15549. After

denying respondent's petition to cancel these

declarations, an appeal was taken by
respondent to the Board of Assessment
Appeals of Quezon City, which required
respondent to pay the amount of P11,651.86
as real property tax on the said steel towers for
the years 1952 to 1956. Respondent paid the
amount under protest, and filed a petition for
review in the Court of Tax Appeals (CTA for
short) which rendered a decision on December
29, 1958, ordering the cancellation of the said
tax declarations and the petitioner City
Treasurer of Quezon City to refund to the
respondent the sum of P11,651.86. The motion
for reconsideration having been denied, on
April 22, 1959, the instant petition for review
was filed.
In upholding the cause of respondents, the CTA
held that: (1) the steel towers come within the
term "poles" which are declared exempt from
taxes under part II paragraph 9 of respondent's
franchise; (2) the steel towers are personal
properties and are not subject to real property
tax; and (3) the City Treasurer of Quezon City is
held responsible for the refund of the amount
paid. These are assigned as errors by the
petitioner in the brief.
The tax exemption privilege of the petitioner is
quoted hereunder:
PAR 9. The grantee shall be liable to pay the
same taxes upon its real estate, buildings,
plant (not including poles, wires, transformers,
and insulators), machinery and personal
property as other persons are or may be

hereafter required by law to pay ... Said

percentage shall be due and payable at the
time stated in paragraph nineteen of Part One
hereof, ... and shall be in lieu of all taxes and
assessments of whatsoever nature and by
whatsoever authority upon the privileges,
earnings, income, franchise, and poles, wires,
transformers, and insulators of the grantee
from which taxes and assessments the
grantee is hereby expressly exempted. (Par. 9,
Part Two, Act No. 484 Respondent's Franchise;
emphasis supplied.)
The word "pole" means "a long, comparatively
slender usually cylindrical piece of wood or
timber, as typically the stem of a small tree
stripped of its branches; also by extension, a
similar typically cylindrical piece or object of
metal or the like". The term also refers to
"an upright standard to the top of which
something is affixed or by which something is
supported; as a dovecote set on a pole;
telegraph poles; a tent pole; sometimes,
specifically a vessel's master (Webster's New
International Dictionary 2nd Ed., p. 1907.)
Along the streets, in the City of Manila, may be
seen cylindrical metal poles, cubical concrete
poles, and poles of the PLDT Co. which are
made of two steel bars joined together by an
interlacing metal rod. They are called "poles"
notwithstanding the fact that they are no made
of wood. It must be noted from paragraph 9,
above quoted, that the concept of the "poles"
for which exemption is granted, is not
determined by their place or location, nor by
the character of the electric current it carries,
nor the material or form of which it is made,

but the use to which they are dedicated. In

accordance with the definitions, pole is not
restricted to a long cylindrical piece of wood or
metal, but includes "upright standards to the
top of which something is affixed or by which
something
is
supported.
As
heretofore
described, respondent's steel supports consists
of a framework of four steel bars or strips
which are bound by steel cross-arms atop of
which are cross-arms supporting five high
voltage transmission wires (See Annex A) and
their sole function is to support or carry such
wires.
The conclusion of the CTA that the steel
supports in question are embraced in the term
"poles" is not a novelty. Several courts of last
resort in the United States have called these
steel supports "steel towers", and they
denominated these supports or towers, as
electric poles. In their decisions the words
"towers"
and
"poles"
were
used
interchangeably, and it is well understood in
that jurisdiction that a transmission tower or
pole means the same thing.
In a proceeding to condemn land for the use of
electric power wires, in which the law provided
that wires shall be constructed upon
suitable poles, this term was construed to
mean either wood or metal poles and in view of
the land being subject to overflow, and the
necessary carrying of numerous wires and the
distance between poles, the statute was
interpreted
to
include towers or poles.
(Stemmons and Dallas Light Co. (Tex) 212 S.W.
222, 224; 32-A Words and Phrases, p. 365.)

The term "poles" was also used to denominate

the steel supports or towers used by an
association used to convey its electric power
furnished to subscribers and members,
constructed for the purpose of fastening high
voltage and dangerous electric wires alongside
public highways. The steel supports or towers
were made of iron or other metals consisting of
two pieces running from the ground up some
thirty feet high, being wider at the bottom than
at the top, the said two metal pieces being
connected with criss-cross iron running from
the bottom to the top, constructed like ladders
and loaded with high voltage electricity. In form
and structure, they are like the steel towers in
question. (Salt River Valley Users' Ass'n v.
Compton, 8 P. 2nd, 249-250.)
The term "poles" was used to denote the steel
towers of an electric company engaged in the
generation of hydro-electric power generated
from its plant to the Tower of Oxford and City of
Waterbury. These steel towers are about 15
feet square at the base and extended to a
height of about 35 feet to a point, and are
embedded in the cement foundations sunk in
the earth, the top of which extends above the
surface of the soil in the tower of Oxford, and
to the towers are attached insulators, arms,
and other equipment capable of carrying wires
for the transmission of electric power
(Connecticut Light and Power Co. v. Oxford,
101 Conn. 383, 126 Atl. p. 1).
In a case, the defendant admitted that the
structure on which a certain person met his
death was built for the purpose of supporting a

transmission wire used for carrying hightension electric power, but claimed that the
steel towers on which it is carried were so large
that their wire took their structure out of the
definition of a pole line. It was held that in
defining the word pole, one should not be
governed by the wire or material of the support
used, but was considering the danger from any
elevated wire carrying electric current, and
that regardless of the size or material wire of
its individual members, any continuous series
of structures intended and used solely or
primarily for the purpose of supporting wires
carrying electric currents is a pole line
(Inspiration Consolidation Cooper Co. v. Bryan
252 P. 1016).
It is evident, therefore, that the word "poles",
as used in Act No. 484 and incorporated in the
petitioner's franchise, should not be given a
restrictive and narrow interpretation, as to
defeat the very object for which the franchise
was granted. The poles as contemplated
thereon, should be understood and taken as a
part of the electric power system of the
respondent Meralco, for the conveyance of
electric current from the source thereof to its
consumers. If the respondent would be
required to employ "wooden poles", or
"rounded poles" as it used to do fifty years
back, then one should admit that the
Philippines is one century behind the age of
space. It should also be conceded by now that
steel towers, like the ones in question, for
obvious reasons, can better effectuate the
purpose for which the respondent's franchise
was granted.

Granting for the purpose of argument that the

steel supports or towers in question are not
embraced within the term poles, the logical
question
posited
is
whether
they
constitute real properties, so that they can be
subject to a real property tax. The tax law does
not provide for a definition of real property; but
Article 415 of the Civil Code does, by stating
the following are immovable property:
(1) Land, buildings, roads, and constructions of
all kinds adhered to the soil;
xxx

xxx

xxx

(3) Everything attached to an immovable in

a fixed manner, in such a way that it cannot be
separated therefrom without breaking the
material or deterioration of the object;
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or

implements intended by the owner of the
tenement for an industry or works which may
be carried in a building or on a piece of land,
and which tends directly to meet the needs of
the said industry or works;
xxx

xxx

xxx

The steel towers or supports in question, do

not come within the objects mentioned in
paragraph 1, because they do not constitute
buildings or constructions adhered to the soil.
They are not construction analogous to
buildings nor adhering to the soil. As per
description, given by the lower court, they are
removable and merely attached to a square

metal frame by means of bolts, which when

unscrewed could easily be dismantled and
moved from place to place. They can not be
included under paragraph 3, as they are not
attached to an immovable in a fixed manner,
and they can be separated without breaking
the material or causing deterioration upon the
object to which they are attached. Each of
these steel towers or supports consists of steel
bars or metal strips, joined together by means
of bolts, which can be disassembled by
unscrewing the bolts and reassembled by
screwing the same. These steel towers or
supports do not also fall under paragraph 5, for
they are
not machineries, receptacles,
instruments or implements, and even if they
were, they are not intended for industry or
works on the land. Petitioner is not engaged in
an industry or works in the land in which the
steel supports or towers are constructed.
It is finally contended that the CTA erred in
ordering the City Treasurer of Quezon City to
refund the sum of P11,651.86, despite the fact
that Quezon City is not a party to the case. It is
argued that as the City Treasurer is not the real
party in interest, but Quezon City, which was
not a party to the suit, notwithstanding its
capacity to sue and be sued, he should not be
ordered to effect the refund. This question has
not been raised in the court below, and,
therefore, it cannot be properly raised for the
first time on appeal. The herein petitioner is
indulging in legal technicalities and niceties
which do not help him any; for factually, it was
he (City Treasurer) whom had insisted that
respondent herein pay the real estate taxes,

which respondent paid under protest. Having

acted in his official capacity as City Treasurer of
Quezon City, he would surely know what to do,
under the circumstances.
IN VIEW HEREOF, the decision appealed from is
hereby affirmed, with costs against the
petitioners.

Board of Assessment Appeals v. MERALCO [G.R.

No. L-15334. January 31, 1964.]
Jun28
En Banc, Paredes (J): 8 concur, 1 concur in
result, 1 took no part.

Facts: On 20 October 1902, the Philippine

Commission enacted Act 484 which authorized
the Municipal Board of Manila to grant a
franchise to construct, maintain and operate an
electric street railway and electric light, heat
and power system in the City of Manila and its
suburbs to the person or persons making the
most favorable bid. Charles M. Swift was
awarded the said franchise on March 1903, the
terms and conditions of which were embodied
in Ordinance 44 approved on 24 March 1903.
Meralco became the transferee and owner of
the franchise. Meralcos electric power is
generated by its hydro-electric plant located at
Botocan Falls, Laguna and is transmitted to the
City of Manila by means of electric
transmission wires, running from the province
of Laguna to the said City. These electric

transmission wires which carry high voltage

current, are fastened to insulators attached on
steel towers constructed by respondent at
intervals, from its hydroelectric plant in the
province of Laguna to the City of Manila.
Meralco has constructed 40 of these steel
towers within Quezon City, on land belonging
to it.
On 15 November 1955, City Assessor of
Quezon City declared the aforesaid steel
towers for real property tax under Tax
Declaration 31992 and 15549. After denying
Meralcos petition to cancel these declarations
an appeal was taken by Meralco to the Board of
Assessment Appeals of Quezon City, which
required Meralco to pay the amount of
P11,651.86 as real property tax on the said
steel towers for the years 1952 to 1956.
Meralco paid the amount under protest, and
filed a petition for review in the Court of Tax
Appeals which rendered a decision on 29
December 1958, ordering the cancellation of
the said tax declarations and the City Treasurer
of Quezon City to refund to Meralco the sum of
P11,651.86. The motion for reconsideration
having been denied, on 22 April 1959, the
petition for review was filed.
Issue: Whether or not the steel towers of an
electric company constitute real property for
the purposes of real property tax.
Held: The steel towers of an electric company
dont constitute real property for the purposes
of real property tax.

Steel towers are not immovable property under

paragraph 1, 3 and 5 of Article 415.
The steel towers or supports do not come
within the objects mentioned in paragraph 1,
because they do not constitute buildings or
constructions adhered to the soil. They are not
constructions analogous to buildings nor
adhering to the soil. As per description, given
by the lower court, they are removable and
merely attached to a square metal frame by
means of bolts, which when unscrewed could
easily be dismantled and moved from place to
place.

The Supreme Court affirmed the decision

appealed from, with costs against the
petitioner

MANILA ELECTRIC COMPANY, petitioner,

vs.
CENTRAL
BOARD
OF
ASSESSMENT
APPEALS,
BOARD
OF
ASSESSMENT
APPEALS OF BATANGAS and PROVINCIAL
ASSESSOR OF BATANGAS, respondents.

AQUINO, J.:
This case is about the imposition of the realty
tax on two oil storage tanks installed in 1969
by Manila Electric Company on a lot in San
Pascual, Batangas which it leased in 1968 from
Caltex (Phil.), Inc. The tanks are within the
Caltex refinery compound. They have a total
capacity of 566,000 barrels. They are used for
storing fuel oil for Meralco's power plants.

They cannot be included under paragraph 3, as

they are not attached to an immovable in a
fixed manner, and they can be separated
without breaking the material or causing
deterioration upon the object to which they are
attached. Each of these steel towers or
supports consists of steel bars or metal strips,
joined together by means of bolts, which can
be disassembled by unscrewing the bolts and
reassembled by screwing the same.

According to Meralco, the storage tanks are

made of steel plates welded and assembled on
the spot. Their bottoms rest on a foundation
consisting of compacted earth as the
outermost layer, a sand pad as the
intermediate layer and a two-inch thick
bituminous asphalt stratum as the top layer.
The bottom of each tank is in contact with the
asphalt layer,

These steel towers or supports do not also fall

under paragraph 5, for they are not
machineries or receptacles, instruments or
implements, and even if they were, they are
not intended for industry or works on the land.
Petitioner is not engaged in an industry or
works on the land in which the steel supports
or towers are constructed.
G.R. No. L-47943 May 31, 1982

The steel sides of the tank are directly

supported underneath by a circular wall made
of concrete, eighteen inches thick, to prevent
the tank from sliding. Hence, according to
Meralco, the tank is not attached to its
foundation. It is not anchored or welded to the
concrete circular wall. Its bottom plate is not
attached to any part of the foundation by bolts,

screws or similar devices. The tank merely sits

on its foundation. Each empty tank can be
floated by flooding its dike-inclosed location
with water four feet deep. (pp. 29-30, Rollo.)
On the other hand, according to the hearing
commissioners of the Central Board of
Assessment Appeals, the area where the two
tanks are located is enclosed with earthen
dikes with electric steel poles on top thereof
and is divided into two parts as the site of each
tank. The foundation of the tanks is elevated
from the remaining area. On both sides of the
earthen dikes are two separate concrete steps
leading to the foundation of each tank.
Tank No. 2 is supported by a concrete
foundation with an asphalt lining about an inch
thick. Pipelines were installed on the sides of
each tank and are connected to the pipelines
of the Manila Enterprises Industrial Corporation
whose buildings and pumping station are near
Tank No. 2.
The Board concludes that while the tanks rest
or sit on their foundation, the foundation itself
and the walls, dikes and steps, which are
integral parts of the tanks, are affixed to the
land while the pipelines are attached to the
tanks. (pp. 60-61, Rollo.) In 1970, the municipal
treasurer of Bauan, Batangas, on the basis of
an assessment made by the provincial
assessor, required Meralco to pay realty taxes
on the two tanks. For the five-year period from
1970 to 1974, the tax and penalties amounted
to P431,703.96 (p. 27, Rollo). The Board
required Meralco to pay the tax and penalties

as a condition for entertaining its appeal from

the adverse decision of the Batangas board of
assessment appeals.
The Central Board of Assessment Appeals
(composed of Acting Secretary of Finance Pedro
M. Almanzor as chairman and Secretary of
Justice Vicente Abad Santos and Secretary of
Local
Government
and
Community
Development Jose Roo as members) in its
decision dated November 5, 1976 ruled that
the tanks together with the foundation, walls,
dikes,
steps,
pipelines
and
other
appurtenances
constitute
taxable
improvements.
Meralco received a copy of that decision on
February 28, 1977. On the fifteenth day, it filed
a motion for reconsideration which the Board
denied in its resolution of November 25, 1977,
a copy of which was received by Meralco on
February 28, 1978.
On March 15, 1978, Meralco filed this special
civil action of certiorari to annul the Board's
decision and resolution. It contends that the
Board acted without jurisdiction and committed
a grave error of law in holding that its storage
tanks are taxable real property.
Meralco contends that the said oil storage
tanks do not fall within any of the kinds of real
property enumerated in article 415 of the Civil
Code and, therefore, they cannot be
categorized
as
realty
by
nature,
by
incorporation, by destination nor by analogy.
Stress is laid on the fact that the tanks are not
attached to the land and that they were placed

on leased land, not on the land owned by

Meralco.
This is one of those highly controversial,
borderline or penumbral cases on the
classification
of property
where
strong
divergent opinions are inevitable. The issue
raised by Meralco has to be resolved in the
light of the provisions of the Assessment Law,
Commonwealth Act No. 470, and the Real
Property Tax Code, Presidential Decree No. 464
which took effect on June 1, 1974.
Section 2 of the Assessment Law provides that
the realty tax is due "on real property,
including land, buildings, machinery, and
other improvements" not specifically exempted
in section 3 thereof. This provision is
reproduced with some modification in the Real
Property Tax Code which provides:
Sec. 38. Incidence of Real Property Tax. They
shall be levied, assessed and collected in all
provinces,
cities
and
municipalities
an
annual ad valorem tax on real property, such
as
land,
buildings,
machinery
and
other improvements affixed or attached to real
property not hereinafter specifically exempted.
The Code contains the following definition in its
section 3:
k) Improvements is a valuable addition
made to property or an amelioration in its
condition, amounting to more than mere
repairs or replacement of waste, costing labor
or capital and intended to enhance its value,

beauty or utility or to adapt it for new or

further purposes.
We hold that while the two storage tanks are
not embedded in the land, they may,
nevertheless, be considered as improvements
on the land, enhancing its utility and rendering
it useful to the oil industry. It is undeniable that
the two tanks have been installed with some
degree of permanence as receptacles for the
considerable quantities of oil needed by
Meralco for its operations.
Oil storage tanks were held to be taxable realty
in Standard Oil Co. of New Jersey vs. Atlantic
City, 15 Atl. 2nd 271.
For purposes of taxation, the term "real
property" may include things which should
generally be regarded as personal property(84
C.J.S. 171, Note 8). It is a familiar phenomenon
to see things classed as real property for
purposes of taxation which on general principle
might be considered personal property
(Standard Oil Co. of New York vs. Jaramillo, 44
Phil. 630, 633).
The case of Board of Assessment Appeals vs.
Manila Electric Company, 119 Phil. 328,
wherein Meralco's steel towers were held not to
be subject to realty tax, is not in point because
in that case the steel towers were regarded as
poles and under its franchise Meralco's poles
are exempt from taxation. Moreover, the steel
towers were not attached to any land or
building. They were removable from their metal
frames.

Nor is there any parallelism between this case

and Mindanao Bus Co. vs. City Assessor, 116
Phil. 501, where the tools and equipment in the
repair, carpentry and blacksmith shops of a
transportation company were held not subject
to realty tax because they were personal
property.
WHEREFORE, the petition is dismissed. The
Board's questioned decision and resolution are
affirmed. No costs.
SO ORDERED.
Barredo (Chairman), Guerrero, De Castro and
Escolin, JJ., concur.
Concepcion, Jr., J., is on leave.
Justice Abad Santos, J., took no part.

G.R. No. L-40411

August 7, 1935

DAVAO SAW MILL CO., INC., plaintiffappellant,

vs.
APRONIANO G. CASTILLO and DAVAO
LIGHT & POWER CO., INC., defendantsappellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo
Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:

The issue in this case, as announced in the

opening sentence of the decision in the trial
court and as set forth by counsel for the parties
on appeal, involves the determination of the
nature of the properties described in the
complaint. The trial judge found that those
properties were personal in nature, and as a
consequence absolved the defendants from the
complaint, with costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a
lumber concession from the Government of the
Philippine Islands. It has operated a sawmill in
the sitio of Maa, barrio of Tigatu, municipality
of Davao, Province of Davao. However, the land
upon which the business was conducted
belonged to another person. On the land the
sawmill company erected a building which
housed the machinery used by it. Some of the
implements thus used were clearly personal
property, the conflict concerning machines
which
were
placed
and
mounted
on
foundations of cement. In the contract of lease
between the sawmill company and the owner
of the land there appeared the following
provision:
That on the expiration of the period agreed
upon, all the improvements and buildings
introduced and erected by the party of the
second part shall pass to the exclusive
ownership of the party of the first part without
any obligation on its part to pay any amount
for said improvements and buildings; also, in
the event the party of the second part should
leave or abandon the land leased before the
time herein stipulated, the improvements and

buildings shall likewise pass to the ownership

of the party of the first part as though the time
agreed upon had expired: Provided, however,
That the machineries and accessories are not
included in the improvements which will pass
to the party of the first part on the expiration
or abandonment of the land leased.
In another action, wherein the Davao Light &
Power Co., Inc., was the plaintiff and the
Davao, Saw, Mill Co., Inc., was the defendant, a
judgment was rendered in favor of the plaintiff
in that action against the defendant in that
action; a writ of execution issued thereon, and
the properties now in question were levied
upon as personalty by the sheriff. No third
party claim was filed for such properties at the
time of the sales thereof as is borne out by the
record made by the plaintiff herein. Indeed the
bidder, which was the plaintiff in that action,
and the defendant herein having consummated
the sale, proceeded to take possession of the
machinery and other properties described in
the corresponding certificates of sale executed
in its favor by the sheriff of Davao.
As connecting up with the facts, it should
further be explained that the Davao Saw Mill
Co., Inc., has on a number of occasions treated
the machinery as personal property by
executing chattel mortgages in favor of third
persons. One of such persons is the appellee
by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil
Code, is in point. According to the Code, real
property consists of

1. Land, buildings, roads and constructions of

all kinds adhering to the soil;
xxx

xxx

xxx

5. Machinery, liquid containers, instruments or

implements intended by the owner of any
building or land for use in connection with any
industry or trade being carried on therein and
which are expressly adapted to meet the
requirements of such trade of industry.
Appellant emphasizes the first paragraph, and
appellees the last mentioned paragraph. We
entertain no doubt that the trial judge and
appellees are right in their appreciation of the
legal doctrines flowing from the facts.
In the first place, it must again be pointed out
that the appellant should have registered its
protest before or at the time of the sale of this
property. It must further be pointed out that
while not conclusive, the characterization of
the property as chattels by the appellant is
indicative of intention and impresses upon the
property the character determined by the
parties. In this connection the decision of this
court in the case of Standard Oil Co. of New
Yorkvs. Jaramillo ( [1923], 44 Phil., 630),
whether obiter dicta or not, furnishes the key
to such a situation.
It is, however not necessary to spend overly
must time in the resolution of this appeal on
side issues. It is machinery which is involved;
moreover, machinery not intended by the
owner of any building or land for use in
connection therewith, but intended by a lessee

for use in a building erected on the land by the

latter to be returned to the lessee on the
expiration or abandonment of the lease.
A similar question arose in Puerto Rico, and on
appeal being taken to the United States
Supreme Court, it was held that machinery
which is movable in its nature only becomes
immobilized when placed in a plant by the
owner of the property or plant, but not when so
placed by a tenant, a usufructuary, or any
person having only a temporary right, unless
such person acted as the agent of the owner. In
the opinion written by Chief Justice White,
whose knowledge of the Civil Law is well
known, it was in part said:
To determine this question involves fixing the
nature and character of the property from the
point of view of the rights of Valdes and its
nature and character from the point of view of
Nevers & Callaghan as a judgment creditor of
the Altagracia Company and the rights derived
by them from the execution levied on the
machinery placed by the corporation in the
plant. Following the Code Napoleon, the Porto
Rican Code treats as immovable (real)
property, not only land and buildings, but also
attributes immovability in some cases to
property of a movable nature, that is, personal
property, because of the destination to which it
is applied. "Things," says section 334 of the
Porto Rican Code, "may be immovable either
by their own nature or by their destination or
the object to which they are applicable."
Numerous illustrations are given in the fifth
subdivision of section 335, which is as follows:

"Machinery,
vessels,
instruments
or
implements intended by the owner of the
tenements for the industrial or works that they
may carry on in any building or upon any land
and which tend directly to meet the needs of
the said industry or works." (See also Code
Nap., articles 516, 518 et seq. to and inclusive
of article 534, recapitulating the things which,
though in themselves movable, may be
immobilized.) So far as the subject-matter with
which we are dealing machinery placed in
the plant it is plain, both under the
provisions of the Porto Rican Law and of the
Code Napoleon, that machinery which is
movable
in
its
nature
only
becomes
immobilized when placed in a plant by the
owner of the property or plant. Such result
would not be accomplished, therefore, by the
placing of machinery in a plant by a tenant or a
usufructuary or any person having only a
temporary right. (Demolombe, Tit. 9, No. 203;
Aubry et Rau, Tit. 2, p. 12, Section 164;
Laurent, Tit. 5, No. 447; and decisions quoted
in Fuzier-Herman ed. Code Napoleon under
articles 522 et seq.) The distinction rests, as
pointed out by Demolombe, upon the fact that
one only having a temporary right to the
possession or enjoyment of property is not
presumed by the law to have applied movable
property belonging to him so as to deprive him
of it by causing it by an act of immobilization to
become the property of another. It follows that
abstractly speaking the machinery put by the
Altagracia Company in the plant belonging to
Sanchez did not lose its character of movable
property
and
become
immovable
by

destination. But in the concrete immobilization

took place because of the express provisions of
the lease under which the Altagracia held,
since the lease in substance required the
putting in of improved machinery, deprived the
tenant of any right to charge against the lessor
the cost such machinery, and it was expressly
stipulated that the machinery so put in should
become a part of the plant belonging to the
owner without compensation to the lessee.
Under such conditions the tenant in putting in
the machinery was acting but as the agent of
the owner in compliance with the obligations
resting upon him, and the immobilization of the
machinery which resulted arose in legal effect
from the act of the owner in giving by contract
a permanent destination to the machinery.
xxx

xxx

xxx

The machinery levied upon by Nevers &

Callaghan, that is, that which was placed in the
plant by the Altagracia Company, being, as
regards Nevers & Callaghan, movable property,
it follows that they had the right to levy on it
under the execution upon the judgment in their
favor, and the exercise of that right did not in a
legal sense conflict with the claim of Valdes,
since as to him the property was a part of the
realty which, as the result of his obligations
under the lease, he could not, for the purpose
of collecting his debt, proceed separately
against. (Valdes vs. Central Altagracia [192],
225 U.S., 58.)
Finding no reversible error in the record, the
judgment appealed from will be affirmed, the

costs of this instance to be paid by the

appellant.
Villa-Real, Imperial, Butte, and Goddard, JJ.,
concur.
Davao
Sawmill
Co.
61
PHIL
GR
No.
August 7, 1935

vs

Castillo
709
L-40411

A tenant placed machines for use in a sawmill

on the landlord's land.
FACTS
Davao Sawmill Co., operated a sawmill. The
land upon which the business was conducted
was leased from another person. On the land,
Davao Sawmill erected a building which housed
the machinery it used. Some of the machines
were mounted and placed on foundations of
cement. In the contract of lease, Davo Sawmill
agreed to turn over free of charge all
improvements and buildings erected by it on
the
premises
with
the
exception
of
machineries, which shall remain with the
Davao Sawmill. In an action brought by the
Davao Light and Power Co., judgment was
rendered against Davao Sawmill. A writ of
execution was issued and the machineries
placed on the sawmill were levied upon as
personalty by the sheriff. Davao Light and
Power Co., proceeded to purchase the
machinery and other properties auctioned by
the sheriff.
ISSUE
Are the machineries real or personal property?

HELD
Art.415 of the New Civil Code provides that
Real Property consists of:
(1) Lands, buildings, roads and constructions of
all kinds adhered to the soil;
xxx
(5) Machinery, receptacles, instruments or
implements intended by the owner pf the
tenement for an industry ot works which may
be carried on in a building or on a piece of
land, and which tend directly to meet the
needs of the said industry or works;
Appellant should have registered its protest
before or at the time of the sale of the
property. While not conclusive, the appellant's
characterization of the property as chattels is
indicative of intention and impresses upon the
property the character determined by the
parties.
Machinery is naturally movable. However,
machinery may be immobilized by destination
or purpose under the following conditions:
General Rule: The machinery only becomes
immobilized if placed in a plant by the owner of
the property or plant.
Immobilization cannot be made by a tenant,
a usufructuary, or any person having only
a temporary right.
Exception:
The tenant, usufructuary,
or temporary possessor acted as agent of the
owner of the premises; or he intended to

permanently give away the property in favor of

the owner.
As a rule, therefore, the machinery should be
considered as Personal Property, since it was
not placed on the land by the owner of the said
land.

LABRADOR, J.:
This is a petition for the review of the decision
of the Court of Tax Appeals in C.T.A. Case No.
710 holding that the petitioner Mindanao Bus
Company is liable to the payment of the realty
tax on its maintenance and repair equipment
hereunder referred to.
Respondent City Assessor of Cagayan de Oro
City assessed at P4,400 petitioner's abovementioned equipment. Petitioner appealed the
assessment to the respondent Board of Tax
Appeals on the ground that the same are not
realty. The Board of Tax Appeals of the City
sustained the city assessor, so petitioner
herein filed with the Court of Tax Appeals a
petition for the review of the assessment.
In the Court of Tax Appeals the parties
submitted the following stipulation of facts:

G.R. No. L-17870

1962

September 29,

MINDANAO
BUS
COMPANY, petitioner,
vs.
THE CITY ASSESSOR & TREASURER and
the BOARD OF TAX APPEALS of Cagayan
de Oro City,respondents.
Binamira, Barria and Irabagon for petitioner.
Vicente E. Sabellina for respondents.

Petitioner
and
respondents,
thru
their
respective counsels agreed to the following
stipulation of facts:
1. That petitioner is a public utility solely
engaged in transporting passengers and
cargoes by motor trucks, over its authorized
lines in the Island of Mindanao, collecting rates
approved by the Public Service Commission;
2. That petitioner has its main office and shop
at Cagayan de Oro City. It maintains Branch
Offices and/or stations at Iligan City, Lanao;
Pagadian, Zamboanga del Sur; Davao City and
Kibawe, Bukidnon Province;

3. That the machineries sought to be assessed

by the respondent as real properties are the
following:
(a) Hobart Electric Welder Machine, appearing
in the attached photograph, marked Annex "A";
(b) Storm Boring Machine, appearing in the
attached photograph, marked Annex "B";
(c) Lathe machine with motor, appearing in the
attached photograph, marked Annex "C";
(d) Black and Decker Grinder, appearing in the
attached photograph, marked Annex "D";
(e) PEMCO Hydraulic Press, appearing in the
attached photograph, marked Annex "E";
(f) Battery charger (Tungar charge machine)
appearing in the attached photograph, marked
Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing in
the attached photograph, marked Annex "G".
4. That these machineries are sitting on
cement or wooden platforms as may be seen in
the attached photographs which form part of
this agreed stipulation of facts;
5. That petitioner is the owner of the land
where it maintains and operates a garage for
its TPU motor trucks; a repair shop; blacksmith
and carpentry shops, and with these
machineries which are placed therein, its TPU
trucks are made; body constructed; and same
are repaired in a condition to be serviceable in

the TPU
operates;

land

transportation

business

it

4. The Tax Court erred in denying petitioner's

motion for reconsideration.

6. That these machineries have never been or

were never used as industrial equipments to
produce finished products for sale, nor to repair
machineries, parts and the like offered to the
general public indiscriminately for business or
commercial purposes for which petitioner has
never engaged in, to date.1awphl.nt

Respondents contend that said equipments,

tho movable, are immobilized by destination, in
accordance with paragraph 5 of Article 415 of
the New Civil Code which provides:

The Court of Tax Appeals having sustained the

respondent city assessor's ruling, and having
denied a motion for reconsideration, petitioner
brought the case to this Court assigning the
following errors:

xxx

1. The Honorable Court of Tax Appeals erred in

upholding respondents' contention that the
questioned assessments are valid; and that
said tools, equipments or machineries are
immovable taxable real properties.
2. The Tax Court erred in its interpretation of
paragraph 5 of Article 415 of the New Civil
Code, and holding that pursuant thereto the
movable equipments are taxable realties, by
reason of their being intended or destined for
use in an industry.
3. The Court of Tax Appeals erred in denying
petitioner's contention that the respondent City
Assessor's power to assess and levy real estate
taxes on machineries is further restricted by
section 31, paragraph (c) of Republic Act No.
521; and

Art. 415. The following are immovable

properties:
xxx

xxx

(5) Machinery, receptacles, instruments or

implements intended by the owner of the
tenement for an industry or works which may
be carried on in a building or on a piece of
land, and which tend directly to meet the
needs of the said industry or works. (Emphasis
ours.)
Note that the stipulation expressly states that
the equipment are placed on wooden or
cement platforms. They can be moved around
and about in petitioner's repair shop. In the
case of B. H. Berkenkotter vs. Cu Unjieng, 61
Phil. 663, the Supreme Court said:
Article 344 (Now Art. 415), paragraph (5) of the
Civil Code, gives the character of real property
to "machinery, liquid containers, instruments
or implements intended by the owner of any
building or land for use in connection with any
industry or trade being carried on therein and
which are expressly adapted to meet the
requirements of such trade or industry."
If the installation of the machinery and
equipment in question in the central of the

Mabalacat Sugar Co., Inc., in lieu of the other of

less capacity existing therein, for its sugar and
industry, converted them into real property by
reason of their purpose, it cannot be said that
their
incorporation
therewith
was
not
permanent in character because, as essential
and principle elements of a sugar central,
without them the sugar central would be
unable to function or carry on the industrial
purpose for which it was established. Inasmuch
as the central is permanent in character, the
necessary machinery and equipment installed
for carrying on the sugar industry for which it
has been established must necessarily be
permanent. (Emphasis ours.)
So that movable equipments to be immobilized
in contemplation of the law must first be
"essential and principal elements" of an
industry or works without which such industry
or works would be "unable to function or carry
on the industrial purpose for which it was
established." We may here distinguish,
therefore, those movable which become
immobilized by destination because they
are essential and principal elements in the
industry for those which may not be so
considered
immobilized
because
they
are merely incidental, not essential and
principal. Thus, cash registers, typewriters,
etc., usually found and used in hotels,
restaurants,
theaters,
etc.
are
merely
incidentals and are not and should not be
considered immobilized by destination, for
these businesses can continue or carry on their
functions without these equity comments.
Airline companies use forklifts, jeep-wagons,

pressure pumps, IBM machines, etc. which are

incidentals, not essentials, and thus retain their
movable
nature.
On
the
other
hand,
machineries of breweries used in the
manufacture of liquor and soft drinks, though
movable in nature, are immobilized because
they are essential to said industries; but the
delivery trucks and adding machines which
they usually own and use and are found within
their
industrial
compounds
are
merely
incidental and retain their movable nature.
Similarly, the tools and equipments in question
in this instant case are, by their nature, not
essential and principle municipal elements of
petitioner's
business
of
transporting
passengers and cargoes by motor trucks. They
are merely incidentals acquired as movables
and used only for expediency to facilitate
and/or improve its service. Even without such
tools and equipments, its business may be
carried on, as petitioner has carried on, without
such equipments, before the war. The
transportation business could be carried on
without the repair or service shop if its rolling
equipment is repaired or serviced in another
shop belonging to another.
The law that governs the determination of the
question at issue is as follows:
Art. 415.
property:
xxx

The

following

xxx

xxx

are

immovable

(5) Machinery, receptacles, instruments or

implements intended by the owner of the

tenement for an industry or works which may

be carried on in a building or on a piece of
land, and which tend directly to meet the
needs of the said industry or works; (Civil Code
of the Phil.)

equipment in question declared not subject to

assessment as real estate for the purposes of
the real estate tax. Without costs.

Aside from the element of essentiality the

above-quoted provision also requires that the
industry or works be carried on in a building or
on a piece of land. Thus in the case
of Berkenkotter vs. Cu Unjieng, supra, the
"machinery, liquid containers, and instruments
or implements" are found in a building
constructed on the land. A sawmill would also
be installed in a building on land more or less
permanently, and the sawing is conducted in
the land or building.

Bengzon, C.J., Padilla, Bautista Angelo, Reyes,

J.B.L., Paredes, Dizon and Makalintal, JJ., concur.
Regala, Concepcion and Barrera JJ., took no
part.

But in the case at bar the equipments in

question are destined only to repair or service
the transportation business, which is not
carried on in a building or permanently on a
piece of land, as demanded by the law. Said
equipments may not, therefore, be deemed
real property.
Resuming what we have set forth above, we
hold that the equipments in question are not
absolutely
essential
to
the
petitioner's
transportation
business,
and
petitioner's
business is not carried on in a building,
tenement or on a specified land, so said
equipment may not be considered real estate
within the meaning of Article 415 (c) of the
Civil Code.
WHEREFORE, the decision subject of the
petition for review is hereby set aside and the

So ordered.

Mindanao Bus Company vs City Assessor

Posted on June 24, 2013
Mindanao Bus Company
116
PHIL
GR
No.
September 29, 1962

vs

City

Assessor
501
L-17870

FACTS
The City Assessor of Cagayan de Oro City
assessed a realty tax on several equipment
and machineries of Mindanao Bus Co. These
equipment were placed on wooden or cement
platforms and can be moved around in the bus
companys repair shop. The bus company
appealed the assessment to the Board of Tax
Appeals on the ground that the same are not
realty. The Board of Tax Appeals of the City,
however, sustained the city assessor. Thus, the
bus company appealed to the Court of Tax
Appeals, which likewise sustained the city
assessor.
HELD
Art. 415 of the NCC classifies the following as
immovable property:

xxx
(5) Machinery, receptacles, instruments or
implements intended by the owner pf the
tenement for an industry or works which may
be carried on in a building or on a piece of
land, and which tend directly to meet the
needs of the said industry or works;
Note that the stipulation expressly states that
the equipment are placed on wooden or
cement platforms. They can be moved around
and about in petitioner's repair shop.
Before movables may be deemed immobilized
in contemplation of Article 415 (5), it is
necessary that they must first be essential
and principal elements of an industry or
works without which such industry or works
would be unable to function or carry on the
industrial purpose for which it was established.
In this case, the tools and equipment in
question are by their nature, not essential and
principal elements of Mindanao Bus Co.s
business of transporting passengers and
cargoes by motor trucks. They are merely
incidentals acquired as movables and used
only for expediency to facilitate and/or improve
its service. Even without such tools and
equipments, its business may be carried on.
Aside from the element of essentiality
the Art.415 (5) also requires that the industry
or works be carried on in a building or on a
piece of land. A sawmill would also be installed
in a building on land more or less permanently,

and the sawing

land/building.

is

conducted

in

the

However, in the instant case, the equipments

in question are destined only to repair or
service the transportation business, which is
not carried on in a building or permanently on
a piece of land, as demanded by law. The
equipments in question are not absolutely
essential to the petitioner's transportation
business, and petitioner's business is not
carried on in a building, tenement or on a
specified land.
As such, the equipments in question are not
deemed
real
property
because
the
transportation business is not carried on in a
building or permanently on a piece of land, as
demanded by law.
The transportation business could be carried on
without the repair or service shop, if its rolling
equipment is repaired or serviced in another
shop belonging to another.
Therefore, the imposition of realty tax on the
maintenance and repair equipment was not
proper because the properties involved were
not real property under Article 415 (5).

INVOLUNTARY
INSOLVENCY
OF
PAUL
STROCHECKER, Appellee, v. ILDEFONSO
RAMIREZ,
creditor-appellant.
WILLIAM
EDMONDS,
assignee.
Lim

&

Lim

for Appellant.

Ross & Lawrence and Antonio T. Carrasco, jr.,

for
the
Fidelity
&
surety
Co.
SYLLABUS
1. CHATTEL MORTGAGE; INTEREST IN A
BUSINESS. An interest in a business may be
the subject of mortgage, for it is a personal
property, being capable of appropriation, and
not included among the real properties
enumerated in article 335 of the Civil Code.
2. ID., ID., DESCRIPTION; SUFFICIENCY OF.
Where the description of the chattel mortgaged
is such as to enable the parties to the
mortgage or any other person to identify the
same after a reasonable investigation or
inquiry, the description is sufficient. Thus if the
drug business known as Antigua Botica
Ramirez (owned by a certain person therein
named and the mortgagor) located at Nos. 123
and 125, Calle Real, District of Intramuros,
Manila, P.I., the description meets the
requirements
of
the
law.
3. ID.; PREFERENCE; PURCHASE PRICE;
POSSESSION. The vendor of a chattel, who is
a creditor for the purchase price, has no
preference over a creditor holding a mortgage
on that chattel where the vendor is not in
possession
of
the
thing
mortgaged.
4.
ID.,
ID.;
RETROACTIVITY;
PERSONAL
SECURITY. A junior mortgage can have no
preference over a senior mortgage by the mere
fact that prior to said junior mortgage a

personal security had been stipulated between

the junior mortgagee and the debtor, because
the second mortgage cannot be given effect as
of the date the personal security was
stipulated.

DECISION
ROMUALDEZ, J. :
The question at issue in this appeal is, which of
the two mortgages here in question must be
given preference? Is it the one in favor of the
Fidelity & Surety Co., or that in favor of
Ildefonso Ramirez. The first was declared by
the trial court to be entitled to preference.
In the lower court there were three mortgages
each of whom claimed preference. They were
the two above mentioned and Concepcion
Ayala. The latters claim was rejected by the
trial court, and that ruling she did not appeal.
There is no question as to the priority in time of
the mortgage in favor of the Fidelity & Surety
Co. which was executed on March 10, 1919,
and registered in due time in the registry of the
property, that in favor of the appellant being
dated September 22, 1919, and registered also
in
the
registry.
The appellant claims preference on these
grounds: (a) That the first mortgage abovementioned is not valid because the property
which is the subject-matter thereof is not

capable of being mortgaged, and the

description of said property is not sufficient;
and (b) that the amount due the appellant is a
purchase price, citing article 1922 of the Civil
Code in support thereof, and that his mortgage
is but a modification of the security given by
the debtor on February 15, 1919, that is, prior
to the mortgage executed in favor of the
Fidelity
&
Surety
Co.
As the first ground, the thing that was
mortgaged to this corporation is described in
the document as follows:jgc:chanrobles.com.ph
". . . his half interest in the drug business
known as Antigua Botica Ramirez (owned by
Srta. Dolores del Rosario and the mortgagor
herein referred to as the partnership), located
at Calle Real Nos. 123 and 125, District of
Intramuros, Manila Philippine Islands."cralaw
virtua1aw
library
With regard to the nature of the property thus
mortgaged which is one-half interest in the
business above described, such interest is a
personal property capable of appropriation and
not included in the enumeration of real
properties in articles 335 of the Civil Code, and
may be the subject of mortgage. All personal
property may be mortgage. (Sec. 7, Act No.
1508.)
The description contained in the document is
sufficient. The law (sec. 7, Act No. 1508)
requires only a description of the following
nature:jgc:chanrobles.com.ph

"The description of the mortgaged property

shall be such as to enable the parties to the
mortgage, or any other person, after
reasonable inquiry and investigation, to
identify the same."cralaw virtua1aw library
Turning to the second error assigned, numbers
1, 2, and 3 of the article 1922 of the Civil Code
invoked by the appellant are not applicable.
Neither the debtor, nor the himself, is in
possession of the property mortgaged, which
is, and since the registration of the mortgage
has been, legally in possession of the Fidelity
Surety Co. (Sec. 4, Act. No. 1508; Meyers v.
Thein,
15
Phil.,
303)
In no way can the mortgage executed in the
favor of the appellant on September 22, 1919,
be given effect as of February 15, 1919, the
date of the sale of the drug store in question.
On the 15th of February of that year, there was
a stipulation about personal security, but not a
mortgage upon property, and much less upon
the
property
in
question.
Moreover, the appellant cannot deny the
preferential character of the mortgage in favor
of the Fidelity & Surety Co. because in his
mortgage was second mortgage, subordinate
to the one made in favor of the Fidelity Surety
Co.
The judgment appealed from is affirmed with
costs against the appellant. So ordered

Araullo, C.J.,
Street,
Malcolm,
Avancea,
Villamor, Ostrand, and Johns, JJ., concur.

G.R. No. L-26278

August 4, 1927

LEON
SIBAL
, plaintiff-appellant,
vs.
EMILIANO J. VALDEZ ET AL., defendants.
EMILIANO J. VALDEZ, appellee.
J.
E.
Blanco
for
appellant.
Felix B. Bautista and Santos and Benitez for
appellee.
JOHNSON, J.:
The action was commenced in the Court of First
Instance of the Province of Tarlac on the 14th
day of December 1924. The facts are about as
conflicting as it is possible for facts to be, in
the trial causes.
As a first cause of action the plaintiff alleged
that the defendant Vitaliano Mamawal, deputy
sheriff of the Province of Tarlac, by virtue of a
writ of execution issued by the Court of First
Instance of Pampanga, attached and sold to
the defendant Emiliano J. Valdez the sugar
cane planted by the plaintiff and his tenants on
seven parcels of land described in the
complaint in the third paragraph of the first
cause of action; that within one year from the
date of the attachment and sale the plaintiff
offered to redeem said sugar cane and

tendered to the defendant Valdez the amount

sufficient to cover the price paid by the latter,
the interest thereon and any assessments or
taxes which he may have paid thereon after
the purchase, and the interest corresponding
thereto and that Valdez refused to accept the
money and to return the sugar cane to the
plaintiff.
As a second cause of action, the plaintiff
alleged that the defendant Emiliano J. Valdez
was attempting to harvest the palay planted in
four of the seven parcels mentioned in the first
cause of action; that he had harvested and
taken possession of the palay in one of said
seven parcels and in another parcel described
in the second cause of action, amounting to
300 cavans; and that all of said palay belonged
to the plaintiff.
Plaintiff prayed that a writ of preliminary
injunction be issued against the defendant
Emiliano J. Valdez his attorneys and agents,
restraining them (1) from distributing him in
the possession of the parcels of land described
in the complaint; (2) from taking possession of,
or harvesting the sugar cane in question; and
(3) from taking possession, or harvesting the
palay in said parcels of land. Plaintiff also
prayed that a judgment be rendered in his
favor and against the defendants ordering
them to consent to the redemption of the sugar
cane in question, and that the defendant
Valdez be condemned to pay to the plaintiff the
sum of P1,056 the value of palay harvested by
him in the two parcels above-mentioned ,with
interest and costs.

On December 27, 1924, the court, after

hearing both parties and upon approval of the
bond for P6,000 filed by the plaintiff, issued the
writ of preliminary injunction prayed for in the
complaint.

sum of P11,833.76, representing the value of

the sugar cane and palay in question, including
damages.

The defendant Emiliano J. Valdez, in his

amended answer, denied generally and
specifically each and every allegation of the
complaint and step up the following defenses:

Upon the issues thus presented by the

pleadings the cause was brought on for trial.
After hearing the evidence, and on April 28,
1926, the Honorable Cayetano Lukban, judge,
rendered a judgment against the plaintiff and
in favor of the defendants

(a) That the sugar cane in question had the

nature of personal property and was not,
therefore, subject to redemption;

(1) Holding that the sugar cane in question was

personal property and, as such, was not
subject to redemption;

(b) That he was the owner of parcels 1, 2 and 7

described in the first cause of action of the
complaint;

(2) Absolving the defendants from all liability

under the complaint; and

(c) That he was the owner of the palay in

parcels 1, 2 and 7; and
(d) That he never attempted to harvest the
palay in parcels 4 and 5.
The defendant Emiliano J. Valdez by way of
counterclaim, alleged that by reason of the
preliminary injunction he was unable to gather
the sugar cane, sugar-cane shoots (puntas de
cana dulce) palay in said parcels of land,
representing a loss to him of P8,375.20 and
that, in addition thereto, he suffered damages
amounting to P3,458.56. He prayed, for a
judgment (1) absolving him from all liability
under the complaint; (2) declaring him to be
the absolute owner of the sugar cane in
question and of the palay in parcels 1, 2 and 7;
and (3) ordering the plaintiff to pay to him the

(3) Condemning the plaintiff and his sureties

Cenon de la Cruz, Juan Sangalang and Marcos
Sibal to jointly and severally pay to the
defendant Emiliano J. Valdez the sum of
P9,439.08 as follows:
(a) P6,757.40, the value of the sugar cane;
(b) 1,435.68, the value of the sugar-cane
shoots;
(c) 646.00, the value of palay harvested by
plaintiff;
(d) 600.00, the value of 150 cavans of palay
which the defendant was not able to raise by
reason of the injunction, at P4 cavan. 9,439.08
From that judgment the plaintiff appealed and
in his assignments of error contends that the
lower court erred: (1) In holding that the sugar

cane in question was personal property and,

therefore, not subject to redemption;
(2) In holding that parcels 1 and 2 of the
complaint belonged to Valdez, as well as
parcels 7 and 8, and that the palay therein was
planted by Valdez;
(3) In holding that Valdez, by reason of the
preliminary injunction failed to realized
P6,757.40 from the sugar cane and P1,435.68
from sugar-cane shoots (puntas de cana dulce);
(4) In holding that, for failure of plaintiff to
gather the sugar cane on time, the defendant
was unable to raise palay on the land, which
would have netted him the sum of P600; and.
(5) In condemning the plaintiff and his sureties
to pay to the defendant the sum of P9,439.08.
It appears from the record:
(1) That on May 11, 1923, the deputy sheriff of
the Province of Tarlac, by virtue of writ of
execution in civil case No. 20203 of the Court
of First Instance of Manila (Macondray & Co.,
Inc. vs. Leon Sibal),levied an attachment on
eight parcels of land belonging to said Leon
Sibal, situated in the Province of Tarlac,
designated in the second of attachment as
parcels 1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B,
Exhibit 2-A).
(2) That on July 30, 1923, Macondray & Co.,
Inc., bought said eight parcels of land, at the
auction held by the sheriff of the Province of
Tarlac, for the sum to P4,273.93, having paid

for the said parcels separately as follows

(Exhibit C, and 2-A):

(3) That within one year from the sale of said

parcel of land, and on the 24th day of
September, 1923, the judgment debtor, Leon
Sibal, paid P2,000 to Macondray & Co., Inc., for
the account of the redemption price of said
Parcel
parcels of land, without specifying the
particular parcels to which said amount was to
1 ...................................................
P1.00applied. The redemption price said eight
..................
parcels was reduced, by virtue of said
transaction, to P2,579.97 including interest
2 ...................................................
(Exhibit C and 2).
2,000.00
..................
The record further shows:
3 ...................................................
120.93
(1) That on April 29, 1924, the defendant
..................
Vitaliano Mamawal, deputy sheriff of the
Province of Tarlac, by virtue of a writ of
4 ...................................................
1,000.00
execution in civil case No. 1301 of the Province
..................
of Pampanga (Emiliano J. Valdez vs. Leon Sibal
1. the same parties in the present case),
5 ...................................................
1.00 attached the personal property of said Leon
..................
Sibal located in Tarlac, among which was
included the sugar cane now in question in the
6 ...................................................
1.00 seven parcels of land described in the
..................
complaint (Exhibit A).
(2) That on May 9 and 10, 1924, said deputy
150.00
sheriff sold at public auction said personal
properties of Leon Sibal, including the sugar
cane in question to Emilio J. Valdez, who paid
therefor the sum of P1,550, of which P600 was
8 ................................................... 1,000.00
for the sugar cane (Exhibit A).
..................
======
(3) That on April 29,1924, said deputy sheriff,
====
by virtue of said writ of execution, also
attached the real property of said Leon Sibal in
4,273.93
Tarlac, including all of his rights, interest and
participation therein, which real property
7
with
the
thereon ..........................

house

consisted of eleven parcels of land and a house

and camarin situated in one of said parcels
(Exhibit A).
(4) That on June 25, 1924, eight of said eleven
parcels, including the house and the camarin,
were bought by Emilio J. Valdez at the auction
held by the sheriff for the sum of P12,200. Said
eight parcels were designated in the certificate
of sale as parcels 1, 3, 4, 5, 6, 7, 10 and 11.
The house and camarin were situated on parcel
7 (Exhibit A).
(5) That the remaining three parcels, indicated
in the certificate of the sheriff as parcels 2, 12,
and 13, were released from the attachment by
virtue of claims presented by Agustin Cuyugan
and Domiciano Tizon (Exhibit A).
(6) That on the same date, June 25, 1924,
Macondray & Co. sold and conveyed to Emilio J.
Valdez for P2,579.97 all of its rights and
interest in the eight parcels of land acquired by
it at public auction held by the deputy sheriff of
Tarlac in connection with civil case No. 20203
of the Court of First Instance of Manila, as
stated above. Said amount represented the
unpaid balance of the redemption price of said
eight parcels, after payment by Leon Sibal of
P2,000 on September 24, 1923, fro the account
of the redemption price, as stated above.
(Exhibit C and 2).
The foregoing statement of facts shows:
(1) The Emilio J. Valdez bought the sugar cane
in question, located in the seven parcels of
land described in the first cause of action of

the complaint at public auction on May 9 and

10, 1924, for P600.
(2) That on July 30, 1923, Macondray & Co.
became the owner of eight parcels of land
situated in the Province of Tarlac belonging to
Leon Sibal and that on September 24, 1923,
Leon Sibal paid to Macondray & Co. P2,000 for
the account of the redemption price of said
parcels.
(3) That on June 25, 1924, Emilio J. Valdez
acquired from Macondray & Co. all of its rights
and interest in the said eight parcels of land.
(4) That on June 25, 1924, Emilio J. Valdez also
acquired all of the rights and interest which
Leon Sibal had or might have had on said eight
parcels by virtue of the P2,000 paid by the
latter to Macondray.
(5) That Emilio J. Valdez became the absolute
owner of said eight parcels of land.
The first question raised by the appeal is,
whether the sugar cane in question is personal
or real property. It is contended that sugar cane
comes under the classification of real property
as "ungathered products" in paragraph 2 of
article 334 of the Civil Code. Said paragraph 2
of article 334 enumerates as real property the
following: Trees, plants, and ungathered
products, while they are annexed to the land or
form an integral part of any immovable
property." That article, however, has received
in
recent
years
an
interpretation
by
the Tribunal Supremo de Espaa, which holds
that, under certain conditions, growing crops

may be considered as personal property.

(Decision of March 18, 1904, vol. 97, Civil
Jurisprudence of Spain.)
Manresa, the eminent commentator of the
Spanish Civil Code, in discussing section 334 of
the Civil Code, in view of the recent decisions
of the supreme Court of Spain, admits that
growing crops are sometimes considered and
treated as personal property. He says:
No creemos, sin embargo, que esto excluya la
excepcionque muchos autores hacen tocante a
la venta de toda cosecha o de parte de ella
cuando aun no esta cogida (cosa frecuente con
la uvay y la naranja), y a la de lenas,
considerando ambas como muebles. El Tribunal
Supremo, en sentencia de 18 de marzo de
1904, al entender sobre un contrato de
arrendamiento de un predio rustico, resuelve
que su terminacion por desahucio no extingue
los derechos del arrendario, para recolectar o
percibir los frutos correspondientes al ao
agricola, dentro del que nacieron aquellos
derechos, cuando el arrendor ha percibido a su
vez
el
importe
de
la
renta
integra
correspondiente, aun cuando lo haya sido por
precepto legal durante el curso del juicio,
fundandose para ello, no solo en que de otra
suerte se daria al desahucio un alcance que no
tiene, sino en que, y esto es lo interesante a
nuestro
proposito, la
consideracion
de
inmuebles que el articulo 334 del Codigo Civil
atribuge a los frutos pendientes, no les priva
del caracter de productos pertenecientes,
como tales, a quienes a ellos tenga derecho,
Ilegado el momento de su recoleccion.

xxx

xxx

xxx

Mas actualmente y por virtud de la nueva

edicion de la Ley Hipotecaria, publicada en 16
de diciembre de 1909, con las reformas
introducidas por la de 21 de abril anterior, la
hipoteca, salvo pacto expreso que disponga lo
contrario, y cualquiera que sea la naturaleza y
forma de la obligacion que garantice, no
comprende los frutos cualquiera que sea la
situacion en que se encuentre. (3 Manresa, 5.
edicion, pags. 22, 23.)

immovable, and are considered as part of the

land to which they are attached."

From the foregoing it appears (1) that, under

Spanish authorities, pending fruits and
ungathered products may be sold and
transferred as personal property; (2) that the
Supreme Court of Spain, in a case of ejectment
of a lessee of an agricultural land, held that the
lessee was entitled to gather the products
corresponding to the agricultural year, because
said fruits did not go with the land but
belonged separately to the lessee; and (3) that
under the Spanish Mortgage Law of 1909, as
amended, the mortgage of a piece of land does
not include the fruits and products existing
thereon, unless the contract expressly provides
otherwise.

The Supreme Court of Louisiana having

occasion to interpret that provision, held that in
some cases "standing crops" may be
considered and dealt with as personal property.
In the case of Lumber Co. vs. Sheriff and Tax
Collector (106 La., 418) the Supreme Court
said: "True, by article 465 of the Civil Code it is
provided that 'standing crops and the fruits of
trees not gathered and trees before they are
cut down . . . are considered as part of the land
to which they are attached, but the
immovability provided for is only one in
abstracto and without reference to rights on or
to the crop acquired by others than the owners
of the property to which the crop is
attached. . . . The existence of a right on the
growing crop is a mobilization by anticipation,
a gathering as it were in advance, rendering
the crop movable quoad the right acquired
therein. Our jurisprudence recognizes the
possible mobilization of the growing crop."
(Citizens' Bank vs. Wiltz, 31 La. Ann., 244;
Porche vs. Bodin,
28
La.,
Ann.,
761;
Sandel vs. Douglass,
27 La.
Ann., 629;
Lewis vs. Klotz, 39 La. Ann., 267.)

An examination of the decisions of the

Supreme Court of Louisiana may give us some
light on the question which we are discussing.
Article 465 of the Civil Code of Louisiana, which
corresponds to paragraph 2 of article 334 of
our Civil Code, provides: "Standing crops and
the fruits of trees not gathered, and trees
before they are cut down, are likewise

"It is true," as the Supreme Court of Louisiana

said in the case of Porche vs. Bodin (28 La. An.,
761) that "article 465 of the Revised Code says
that standing crops are considered as
immovable and as part of the land to which
they are attached, and article 466 declares
that the fruits of an immovable gathered or
produced while it is under seizure are

considered as making part thereof, and

incurred to the benefit of the person making
the seizure. But the evident meaning of these
articles, is where the crops belong to the owner
of the plantation they form part of the
immovable, and where it is seized, the fruits
gathered or produced inure to the benefit of
the seizing creditor.
A crop raised on leased premises in no sense
forms part of the immovable. It belongs to the
lessee, and may be sold by him, whether it be
gathered or not, and it may be sold by his
judgment creditors. If it necessarily forms part
of the leased premises the result would be that
it could not be sold under execution separate
and apart from the land. If a lessee obtain
supplies to make his crop, the factor's lien
would not attach to the crop as a separate
thing belonging to his debtor, but the land
belonging to the lessor would be affected with
the recorded privilege. The law cannot be
construed so as to result in such absurd
consequences.
In the case of Citizen's Bank vs. Wiltz (31 La.
Ann., 244)the court said:
If the crop quoad the pledge thereof under the
act of 1874 was an immovable, it would be
destructive of the very objects of the act, it
would render the pledge of the crop objects of
the act, it would render the pledge of the crop
impossible, for if the crop was an inseparable
part of the realty possession of the latter would
be necessary to that of the former; but such is
not the case. True, by article 465 C. C. it is

provided that "standing crops and the fruits of

trees not gathered and trees before they are
cut down are likewise immovable and are
considered as part of the land to which they
are attached;" but the immovability provided
for is only one in abstracto and without
reference to rights on or to the crop acquired
by other than the owners of the property to
which the crop was attached. The immovability
of a growing crop is in the order of things
temporary, for the crop passes from the state
of a growing to that of a gathered one, from an
immovable to a movable. The existence of a
right on the growing crop is a mobilization by
anticipation, a gathering as it were in advance,
rendering the crop movable quoad the right
acquired thereon. The provision of our Code is
identical with the Napoleon Code 520, and we
may therefore obtain light by an examination
of the jurisprudence of France.
The rule above announced, not only by
the Tribunal Supremo de Espaa but by the
Supreme Court of Louisiana, is followed in
practically every state of the Union.
From an examination of the reports and codes
of the State of California and other states we
find that the settle doctrine followed in said
states in connection with the attachment of
property and execution of judgment is, that
growing crops raised by yearly labor and
cultivation are considered personal property. (6
Corpuz Juris, p. 197; 17 Corpus Juris, p. 379; 23
Corpus Juris, p. 329: Raventas vs. Green, 57
Cal., 254; Norris vs. Watson, 55 Am. Dec., 161;
Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin

on Sales, sec. 126; McKenzie vs. Lampley, 31

Ala., 526; Crine vs. Tifts and Co., 65 Ga., 644;
Gillitt vs. Truax,
27
Minn.,
528;
Preston vs. Ryan, 45 Mich., 174; Freeman on
Execution, vol. 1, p. 438; Drake on Attachment,
sec. 249; Mechem on Sales, sec. 200 and 763.)
Mr. Mechem says that a valid sale may be
made of a thing, which though not yet actually
in existence, is reasonably certain to come into
existence as the natural increment or usual
incident of something already in existence, and
then belonging to the vendor, and then title
will vest in the buyer the moment the thing
comes into existence. (Emerson vs. European
Railway Co., 67 Me., 387; Cutting vs. Packers
Exchange, 21 Am. St. Rep., 63.) Things of this
nature are said to have a potential existence. A
man may sell property of which he is
potentially and not actually possessed. He may
make a valid sale of the wine that a vineyard is
expected to produce; or the gain a field may
grow in a given time; or the milk a cow may
yield during the coming year; or the wool that
shall thereafter grow upon sheep; or what may
be taken at the next cast of a fisherman's net;
or fruits to grow; or young animals not yet in
existence; or the good will of a trade and the
like. The thing sold, however, must be specific
and identified. They must be also owned at the
time by the vendor. (Hull vs. Hull, 48 Conn.,
250 [40 Am. Rep., 165].)
It is contended on the part of the appellee that
paragraph 2 of article 334 of the Civil Code has
been modified by section 450 of the Code of
Civil Procedure as well as by Act No. 1508, the

Chattel Mortgage Law. Said section 450

enumerates the property of a judgment debtor
which may be subjected to execution. The
pertinent portion of said section reads as
follows: "All goods, chattels, moneys, and other
property, both real and personal, * * * shall be
liable to execution. Said section 450 and most
of the other sections of the Code of Civil
Procedure relating to the execution of
judgment were taken from the Code of Civil
Procedure of California. The Supreme Court of
California, under section 688 of the Code of
Civil Procedure of that state (Pomeroy, p. 424)
has held, without variation, that growing crops
were personal property and subject to
execution.
Act No. 1508, the Chattel Mortgage Law, fully
recognized that growing crops are personal
property. Section 2 of said Act provides: "All
personal property shall be subject to mortgage,
agreeably to the provisions of this Act, and a
mortgage executed in pursuance thereof shall
be termed a chattel mortgage." Section 7 in
part provides: "If growing crops be mortgaged
the mortgage may contain an agreement
stipulating that the mortgagor binds himself
properly to tend, care for and protect the crop
while growing.
It is clear from the foregoing provisions that Act
No. 1508 was enacted on the assumption that
"growing crops" are personal property. This
consideration tends to support the conclusion
hereinbefore stated, that paragraph 2 of article
334 of the Civil Code has been modified by
section 450 of Act No. 190 and by Act No. 1508

in the sense that "ungathered products" as

mentioned in said article of the Civil Code have
the nature of personal property. In other words,
the phrase "personal property" should be
understood to include "ungathered products."
At common law, and generally in the United
States, all annual crops which are raised by
yearly manurance and labor, and essentially
owe their annual existence to cultivation by
man, . may be levied on as personal property."
(23 C. J., p. 329.) On this question Freeman, in
his treatise on the Law of Executions, says:
"Crops, whether growing or standing in the
field ready to be harvested, are, when
produced by annual cultivation, no part of the
realty. They are, therefore, liable to voluntary
transfer as chattels. It is equally well settled
that they may be seized and sold under
execution. (Freeman on Executions, vol. p.
438.)
We may, therefore, conclude that paragraph 2
of article 334 of the Civil Code has been
modified by section 450 of the Code of Civil
Procedure and by Act No. 1508, in the sense
that, for the purpose of attachment and
execution, and for the purposes of the Chattel
Mortgage Law, "ungathered products" have the
nature of personal property. The lower court,
therefore, committed no error in holding that
the sugar cane in question was personal
property and, as such, was not subject to
redemption.
All the other assignments of error made by the
appellant, as above stated, relate to questions

of fact only. Before entering upon a discussion

of said assignments of error, we deem it
opportune to take special notice of the failure
of the plaintiff to appear at the trial during the
presentation of evidence by the defendant. His
absence from the trial and his failure to crossexamine the defendant have lent considerable
weight to the evidence then presented for the
defense.
Coming not to the ownership of parcels 1 and 2
described in the first cause of action of the
complaint, the plaintiff made a futile attempt to
show that said two parcels belonged to Agustin
Cuyugan and were the identical parcel 2 which
was excluded from the attachment and sale of
real property of Sibal to Valdez on June 25,
1924, as stated above. A comparison of the
description of parcel 2 in the certificate of sale
by the sheriff (Exhibit A) and the description of
parcels 1 and 2 of the complaint will readily
show that they are not the same.
The description of the parcels in the complaint
is as follows:
1. La caa dulce sembrada por los inquilinos
del ejecutado Leon Sibal 1. en una parcela de
terreno de la pertenencia del citado ejecutado,
situada en Libutad, Culubasa, Bamban, Tarlac,
de unas dos hectareas poco mas o menos de
superficie.
2. La caa dulce sembrada por el inquilino del
ejecutado Leon Sibal 1., Ilamado Alejandro
Policarpio, en una parcela de terreno de la
pertenencia del ejecutado, situada en Dalayap,
Culubasa, Bamban, Tarlac de unas dos

hectareas de superficie poco mas o menos."

The description of parcel 2 given in the
certificate of sale (Exhibit A) is as follows:
2a. Terreno palayero situado en Culubasa,
Bamban, Tarlac, de 177,090 metros cuadrados
de superficie, linda al N. con Canuto Sibal,
Esteban Lazatin and Alejandro Dayrit; al E. con
Francisco Dizon, Felipe Mau and others; al S.
con Alejandro Dayrit, Isidro Santos and Melecio
Mau; y al O. con Alejandro Dayrit and Paulino
Vergara. Tax No. 2854, vador amillarado P4,200
pesos.
On the other hand the evidence for the
defendant purported to show that parcels 1
and 2 of the complaint were included among
the parcels bought by Valdez from Macondray
on June 25, 1924, and corresponded to parcel 4
in the deed of sale (Exhibit B and 2), and were
also included among the parcels bought by
Valdez at the auction of the real property of
Leon Sibal on June 25, 1924, and corresponded
to parcel 3 in the certificate of sale made by
the sheriff (Exhibit A). The description of parcel
4 (Exhibit 2) and parcel 3 (Exhibit A) is as
follows:
Parcels No. 4. Terreno palayero, ubicado en
el barrio de Culubasa,Bamban, Tarlac, I. F. de
145,000 metros cuadrados de superficie,
lindante al Norte con Road of the barrio of
Culubasa that goes to Concepcion; al Este con
Juan Dizon; al Sur con Lucio Mao y Canuto
Sibal y al Oeste con Esteban Lazatin, su valor
amillarado asciende a la suma de P2,990. Tax
No. 2856.

As will be noticed, there is hardly any relation

between parcels 1 and 2 of the complaint and
parcel 4 (Exhibit 2 and B) and parcel 3 (Exhibit
A). But, inasmuch as the plaintiff did not care
to appear at the trial when the defendant
offered his evidence, we are inclined to give
more weight to the evidence adduced by him
that to the evidence adduced by the plaintiff,
with respect to the ownership of parcels 1 and
2 of the compliant. We, therefore, conclude
that parcels 1 and 2 of the complaint belong to
the defendant, having acquired the same from
Macondray & Co. on June 25, 1924, and from
the plaintiff Leon Sibal on the same date.

With reference to the parcel of land in Pacalcal,

Tarlac, described in paragraph 3 of the second
cause of action, it appears from the testimony
of the plaintiff himself that said parcel
corresponds to parcel 8 of the deed of sale of
Macondray to Valdez (Exhibit B and 2) and to
parcel 10 in the deed of sale executed by the
sheriff in favor of Valdez (Exhibit A). Valdez is
therefore the absolute owner of said parcel,
having acquired the interest of both Macondray
and Sibal therein.

It appears, however, that the plaintiff planted

the palay in said parcels and harvested
therefrom 190 cavans. There being no
evidence of bad faith on his part, he is
therefore entitled to one-half of the crop, or 95
cavans. He should therefore be condemned to
pay to the defendant for 95 cavans only, at
P3.40 a cavan, or the sum of P323, and not for
the total of 190 cavans as held by the lower
court.

Execution in favor of Macondray & Co., May 11,

1923. Eight parcels of land were attached
under said execution. Said parcels of land were
sold to Macondray & Co. on the 30th day of
July, 1923. Rice paid P4,273.93. On September
24, 1923, Leon Sibal paid to Macondray & Co.
P2,000 on the redemption of said parcels of
land. (See Exhibits B and C ).

As to the ownership of parcel 7 of the

complaint, the evidence shows that said parcel
corresponds to parcel 1 of the deed of sale of
Macondray & Co, to Valdez (Exhibit B and 2),
and to parcel 4 in the certificate of sale to
Valdez of real property belonging to Sibal,
executed by the sheriff as above stated
(Exhibit A). Valdez is therefore the absolute
owner of said parcel, having acquired the
interest of both Macondray and Sibal in said
parcel.

In this connection the following facts are

worthy of mention:

Attachment, April 29, 1924, in favor of Valdez.

Personal property of Sibal was attached,
including the sugar cane in question. (Exhibit
A) The said personal property so attached, sold
at public auction May 9 and 10, 1924. April 29,
1924, the real property was attached under the
execution in favor of Valdez (Exhibit A). June
25, 1924, said real property was sold and
purchased by Valdez (Exhibit A).
June 25, 1924, Macondray & Co. sold all of the
land which they had purchased at public
auction on the 30th day of July, 1923, to
Valdez.

As to the loss of the defendant in sugar cane

by reason of the injunction, the evidence shows
that the sugar cane in question covered an
area of 22 hectares and 60 ares (Exhibits 8, 8-b
and 8-c); that said area would have yielded an
average crop of 1039 picos and 60 cates; that
one-half of the quantity, or 519 picos and 80
cates would have corresponded to the
defendant, as owner; that during the season
the sugar was selling at P13 a pico (Exhibit 5
and 5-A). Therefore, the defendant, as owner,
would have netted P 6,757.40 from the sugar
cane in question. The evidence also shows that
the defendant could have taken from the sugar
cane 1,017,000 sugar-cane shoots (puntas de
cana) and not 1,170,000 as computed by the
lower court. During the season the shoots were
selling at P1.20 a thousand (Exhibits 6 and 7).
The defendant therefore would have netted
P1,220.40 from sugar-cane shoots and not
P1,435.68 as allowed by the lower court.
As to the palay harvested by the plaintiff in
parcels 1 and 2 of the complaint, amounting to
190 cavans, one-half of said quantity should
belong to the plaintiff, as stated above, and the
other half to the defendant. The court erred in
awarding the whole crop to the defendant. The
plaintiff should therefore pay the defendant for
95 cavans only, at P3.40 a cavan, or P323
instead of P646 as allowed by the lower court.
The evidence also shows that the defendant
was prevented by the acts of the plaintiff from
cultivating about 10 hectares of the land
involved in the litigation. He expected to have
raised about 600 cavans of palay, 300 cavans

of which would have corresponded to him as

owner. The lower court has wisely reduced his
share to 150 cavans only. At P4 a cavan, the
palay would have netted him P600.
In view of the foregoing, the judgment
appealed from is hereby modified. The plaintiff
and his sureties Cenon de la Cruz, Juan
Sangalang and Marcos Sibal are hereby
ordered to pay to the defendant jointly and
severally the sum of P8,900.80, instead of
P9,439.08 allowed by the lower court, as
follows:
P6,757.40
1,220.40
323.00

600.00

ISSUE: WON the sugarcane in question is a

personal
or
real
property.

HELD:Sugarcane is under real property as

ungathered products. The Supreme Court of
Louisiana provided that standing crops are
considered as part of the land to which they
for the sugar cane;
are attached but the immovability provided for
is only one in abstract. The existence of a right
for the sugar cane shoots;
on the growing crop is mobilization by
anticipation, a gathering as it were in advance,
for the palay harvested by rendering the crop movable quoad the right
acquired therein.
plaintiff in parcels 1 and 2;
-A crop raised on leased premises in no sense
for the palay which defendant
forms part of the immovable. It belongs to the
could have raised.
lessee and may be sold by him.

8,900.80
========
====
In all other respects, the judgment appealed
from is hereby affirmed, with costs. So ordered.
Street, Malcolm, Villamor, Romualdez and VillaReal., JJ., concur.
SIBAL v. VALDEZ

FACTS: The deputy sheriff of Tarlac attached

and sold to Valdez the sugarcane planted by
the plaintiff. The plaintiff asked for the
redemption of the sugarcane. Valdez said that
it cannot be subject to redemption because it is
a personal property.

-Act 1508 (Chattel Mortgage Law) recognize

growing crops as personal property.
Crops whether growing or ready to be
harvested,
when
produced
by
annual
cultivation, is not part of realty.
Paragraph 2 of Art. 334 of the Civil Code has
been modified by Sec. 450 of Code of Civil
Procedure and Act no. 1508 in the sense that
for purposes of attachment and execution and
Chattel Mortgage Law, ungathered products
have the nature of personal property.

NARVASA, J.:
From the adverse judgment of the Court of
Appeals, 1 affirming in toto that of the Trial
Court, 2 the petitioner has come to this Court
on an appeal by certiorari to plead for reversal
of (1) the factual determination that she had
sold the lot in controversy to private
respondent, and (2) the legal conclusion that
neither the 1973 nor the 1987 Constitution
disqualifies the corporation known as the
Religious of the Virgin Mary, from acquiring the
land in question and registering it in its name.
In light of the time-honored rule that findings of
fact of the Court of Appeals are generally final,
and the doctrine lately laid down by this Court
on the precise legal issue now raised by
petitioner, her appeal must fail.

G.R. No. L-44237 February 28, 1989

VICTORIA ONG DE OCSIO, petitioner,
vs.
COURT OF APPEALS and the RELIGIOUS
OF THE VIRGIN MARY, represented by
M.O.
Leoncia
Pacquing,
R.V.M., respondents.
Elpedio N. Cabasan for petitioner.
Padilla Law Office for private respondent.

The controversy at bar arose in connection with

cadastral proceedings initiated by the Director
of Lands, in behalf of the Republic, for the
settlement and adjudication of title to a large
tract of land measuring 261.5791 hectares,
divided into 1,419 lots, situated in the City of
Iligan. 3
Victoria Ong de Ocsio (herein petitioner)
seasonably presented an answer to the
petition. She alleged that she was the owner,
by purchase, of two (2) parcels of land with
specific boundaries comprehended in the
cadastral proceeding: Lot No. 1272, measuring
256 square meters, and Lot 1273 a road lot,
measuring 21 square meters; and that as
owner, she had been in possession of both lots
for fifteen (15) years, and her predecessors-in-

interest, for sixty (60) years. 4 Title to the

same parcels of land was however claimed by
the Religious of the Virgin Mary.5 In its answer,
it averred that it had bought the lots from
Victoria Ong de Ocsio and had been in
possession as owner thereof for over four
years, and its possession and that of its
predecessors was immemorial.
Evidence was received on these conflicting
assertions after which the Cadastral Court
rendered
judgment,
declaring
that
the
evidence satisfactorily established that Victoria
Ong de Ocsio had in truth sold Lot No. 1272 to
the Religious of the Virgin Mary in virtue of a
deed of sale dated April 12, 1956 (Exhibit 1),
and Lot No. 1273 was a road right of way
granted to the City of Iligan. The judgment
contained
the
following
dispositive
portion, viz: 6
WHEREFORE, the court renders judgment
adjudicating Cadastral Lot 1272, Iligan
Cadastre, to the Religious of the Virgin Mary, a
duly registered domestic religious corporation,
the members of which are all Filipino citizens,
with main office in the City of Manila, but the
building existing thereon is hereby declared to
be the property of claimant Victoria Ong de
Ocsio who is hereby ordered to remove Said
building out of the premises within 90 days
from date hereof. The claim of Victoria Ong de
Ocsio with respect to said cadastral lot is
dismiss. No pronouncement is made as to
costs.

Let the corresponding decree issue 30 days

after this decision shall have become final.
As aforestated, the Court of Appeals affirmed
the cadastral court's decision in toto. So, too,
will this Court.
Both the cadastral Court and the Court of
Appeals came to the conclusion, after
analysing and weighing the testimonial and
documentary evidence adduced by the parties,
that Virginia Ong de Ocsio's version of the facts
was not true-that it was another property, not
Lot No. 1272, that she had conveyed to the
religious corporation but that it was indeed Lot
No. 1272 that was subject of the sale and had
indeed been transferred to the latter. Now,
findings of fact of this sort, contained in a
decision of the Court of Appeals are by long
and uniformly observed rule conclusive on the
parties and on the Supreme Court, as
well; 7 subject only to a few specified
exceptions, 8 none of which obtains here, said
findings may not be reviewed on appeal.
As regards the issue of law raised by her,
petitioner fares no better. Citing Manila Electric
Co. v. Castro-Bartolome, 114 SCRA 799 (1982)
and Republic v. Villanueva, 114 SCRA 875
(1982), in relation to Section 11, Article XIV of
the 1973 Constitution, she asserts that as the
private respondent is a religious corporation, it
is disqualified to obtain judicial confirmation of
an imperfect title under Section 48(b) of the
Public Land Act which grants that right only to
natural persons. The cited rulings no longer
control. Current doctrine, first announced by

the Court en banc in Director of Lands v. I.A.C.

146 SCRA 509 (1986), is that open, continuous
and exclusive possession of alienable public
land for at least thirty (30) years in accordance
with the Public Land Act ipso jureconverts the
land to private property, and a juridical person
who thereafter acquires the same may have
title thereto confirmed in its name. Virtually the
same state of facts obtained in said case that
now obtain here. A private corporation had
purchased the land originally of the public
domain from parties who had, by themselves
and through their predecessors-in-interest,
possessed and occupied it since time
immemorial. It had thereafter instituted
proceedings for confirmation of title under
Section 48(b) of the Public Land Act. In
upholding its right to do so, the court held that
the fact that the proceedings had been
instituted by said purchaser in its own name
and not in the name of the transferors was "xx
simply xx (an) accidental circumstance,
productive of a defect hardly more than
procedural and in nowise affecting the
substance and merits of the right of ownership
sought to be confirmed." The ruling was
reaffirmed in two later cases, Director of Lands
v. Manila Electric Co., 153 SCRA 686
(September 11, 1987), and Republic v.
C.A., 156 SCRA 344 (October 30, 1987) where
the same question of law was raised. In the
latter it was expressly held that the
prohibitions in the 1973 and 1987 Constitutions
against acquisition or registration of lands by
or in behalf of private corporations do not
apply to public lands already converted to

private ownership by natural persons under the

provisions of the Public Land Act. In the present
case, Virginia Ong de Ocsio and her
predecessors-in-interest having possessed Lot
No. 1272 for the period and under the
conditions prescribed by law for acquisition of
ownership of disposable public land prior to the
sale of the property to the Religious of the
Virgin Mary, confirmation of title thereto in the
latter's name is, under the precedents referred
to, entirely in order.
WHEREFORE, the judgment of the Court of
Appeals subject of the petition for review on
certiorari is AFFIRMEDin toto. Costs against the
petitioner.
Cruz, Gancayco, Grio-Aquino and Medialdea,
JJ., concur.

THIRD DIVISION
[G.R. No. 153201. January 26, 2005]
JOSE MENCHAVEZ, JUAN MENCHAVEZ JR.,
SIMEON
MENCHAVEZ,
RODOLFO
MENCHAVEZ,
CESAR
MENCHAVEZ,
REYNALDO,
MENCHAVEZ,
ALMA
MENCHAVEZ, ELMA MENCHAVEZ, CHARITO
M. MAGA, FE M. POTOT, THELMA M.
REROMA, MYRNA M. YBAEZ, and SARAH
M. VILLABER, petitioners, vs. FLORENTINO
TEVES JR., respondent.
DECISION
PANGANIBAN, J.:
Avoid contract is deemed legally nonexistent. It
produces no legal effect. As a general rule,
courts leave parties to such a contract as they
are, because they are in pari delicto or equally
at fault. Neither party is entitled to legal
protection.
The Case
Before us is a Petition for Review[1] under Rule
45 of the Rules of Court, assailing the February

28, 2001 Decision[2] and the April 16, 2002

Resolution[3] of the Court of Appeals (CA) in
CA-GR CV No. 51144. The challenged Decision
disposed as follows:
WHEREFORE,
the
assailed
hereby MODIFIED, as follows:

decision

is

1. Ordering [petitioners] to jointly and severally

pay
the
[respondent]
the
amount
of P128,074.40
as
actual
damages,
and P50,000.00 as liquidated damages;
2. Dismissing the third party complaint against
the third party defendants;
3. Upholding the counterclaims of the third
party defendants against the [petitioners.
Petitioners] are hereby required to pay [the]
third party defendants the sum of P30,000.00
as moral damages for the clearly unfounded
suit;

On February 28, 1986, a Contract of Lease was

executed by Jose S. Menchavez, Juan S.
Menchavez Sr., Juan S. Menchavez Jr., Rodolfo
Menchavez, Simeon Menchavez, Reynaldo
Menchavez, Cesar Menchavez, Charito M.
Maga, Fe M. Potot, Thelma R. Reroma, Myrna
Ybaez, Sonia S. Menchavez, Sarah Villaver,
Alma S. Menchavez, and Elma S. Menchavez,
as lessors; and Florentino Teves Jr. as lessee.
The pertinent portions of the Contract are
herein reproduced as follows:
WHEREAS, the LESSORS are the absolute and
lawful co-owners of that area covered by
FISHPOND APPLICATION No. VI-1076 of Juan
Menchavez, Sr., filed on September 20, 1972,
at Fisheries Regional Office No. VII, Cebu City
covering an area of 10.0 hectares more or less
located at Tabuelan, Cebu;
xxxxxxxxx

4. Requiring the [petitioners] to reimburse the

third party defendants the sum of P10,000.00
in the concept of attorneys fees and
appearance fees of P300.00 per appearance;

NOW, THEREFORE, for and

the
mutual
covenant
hereinafter set forth, the
LESSEE have agreed and
follows:

5. Requiring the [petitioners] to reimburse the

third party defendants the sum of P10,000.00
as exemplary damages pro bono publico and
litigation expenses including costs, in the sum
of P5,000.00.[4]

1. The TERM of this LEASE is FIVE (5) YEARS,

from and after the execution of this Contract of
Lease, renewable at the OPTION of the
LESSORS;

The assailed Resolution denied

Motion for Reconsideration.
The Facts

petitioners

in consideration of
and
stipulations
LESSORS and the
hereby agree as

2. The LESSEE agrees to pay the LESSORS at

the residence of JUAN MENCHAVEZ SR., one of
the LESSORS herein, the sum of FORTY
THOUSAND PESOS (P40,000.00) Philippine
Currency, annually x x x;

3. The LESSORS hereby warrant that the

above-described parcel of land is fit and good
for the intended use as FISHPOND;
4. The LESSORS hereby warrant and assure to
maintain the LESSEE in the peaceful and
adequate enjoyment of the lease for the entire
duration of the contract;
5. The LESSORS hereby further warrant that
the LESSEE can and shall enjoy the intended
use of the leased premises as FISHPOND FOR
THE ENTIRE DURATION OF THE CONTRACT;
6. The LESSORS hereby warrant that the
above-premises is free from all liens and
encumbrances, and shall protect the LESSEE of
his right of lease over the said premises from
any and all claims whatsoever;
7. Any violation of the terms and conditions
herein
provided,
more
particularly
the
warranties above-mentioned, the parties of this
Contract
responsible
thereof
shall
pay
liquidated damages in the amount of not less
than P50,000.00 to the offended party of this
Contract; in case the LESSORS violated
therefor, they bound themselves jointly and
severally liable to the LESSEE;
x x x x x x x x x.[5]
On June 2, 1988, Cebu RTC Sheriffs Gumersindo
Gimenez and Arturo Cabigon demolished the
fishpond dikes constructed by respondent and
delivered possession of the subject property to
other parties.[6] As a result, he filed a
Complaint for damages with application for

preliminary attachment against petitioners. In

his Complaint, he alleged that the lessors had
violated their Contract of Lease, specifically the
peaceful and adequate enjoyment of the
property for the entire duration of the Contract.
He claimed P157,184.40 as consequential
damages for the demolition of the fishpond
dikes, P395,390.00 as unearned income, and
an amount not less than P100,000.00 for
rentals paid.[7]
Respondent further asserted that the lessors
had withheld from him the findings of the trial
court in Civil Case No. 510-T, entitled Eufracia
Colongan and Paulino Pamplona v. Juan
Menchavez Sr. and Sevillana S. Menchavez. In
that case involving the same property, subject
of the lease, the Menchavez spouses were
ordered to remove the dikes illegally
constructed and to pay damages and attorneys
fees.[8]
Petitioners filed a Third Party Complaint against
Benny and Elizabeth Allego, Albino Laput,
Adrinico Che and Charlemagne Arendain Jr., as
agents of Eufracia Colongan and Paulino
Pamplona.
The
third-party
defendants
maintained that the Complaint filed against
them was unfounded. As agents of their elderly
parents, they could not be sued in their
personal capacity. Thus, they asserted their
own counterclaims.[9]
After trial on the merits, the RTC ruled thus:
[The court must resolve the issues one by one.]
As to the question of whether the contract of
lease between Teves and the [petitioners] is

valid, we must look into the present law on the

matter of fishponds. And this is Pres. Decree
No. 704 which provides in Sec. 24:
Lease of fishponds-Public lands available for
fishpond
development
including
those
earmarked for family-size fishponds and not
yet leased prior to November 9, 1972 shall be
leased only to qualified persons, associations,
cooperatives or corporations, subject to the
following conditions.
1. The lease shall be for a period of twenty five
years (25), renewable for another twenty five
years;
2. Fifty percent of the area leased shall be
developed and be producing in commercial
scale within three years and the remaining
portion shall be developed and be producing in
commercial scale within five years; both
periods begin from the execution of the lease
contract;
3. All areas not fully developed within five
years from the date of the execution of the
lease contract shall automatically revert to the
public domain for disposition of the bureau;
provided that a lessee who failed to develop
the area or any portion thereof shall not be
permitted to reapply for said area or any
portion thereof or any public land under this
decree; and/or any portion thereof or any
public land under this decree;
4. No portion of the leased area shall be
subleased.

The Constitution, (Sec. 2 & 3, Art. XII of the

1987 Constitution) states:
Sec. 2 - All lands of the public domain, waters,
minerals, coal, petroleum and other mineral
oils, all forces of potential energy, fisheries,
forests, or timber, wild life, flora and fauna and
other natural resources are owned by the state.
Sec. 3 - Lands of the public domain are
classified into agricultural, forest or timber,
mineral lands and national parks. Agricultural
lands of the public domain may be further
classified by law according to the uses to which
they may be devoted. Alienable lands of the
public domain shall be limited to agricultural
lands x x x.
As a consequence of these provisions, and the
declared public policy of the State under the
Regalian Doctrine, the lease contract between
Florentino Teves, Jr. and Juan Menchavez Sr.
and his family is a patent nullity. Being a patent
nullity, [petitioners] could not give any rights to
Florentino Teves, Jr. under the principle: NEMO
DAT QUOD NON HABET - meaning ONE
CANNOT GIVE WHAT HE DOES NOT HAVE,
considering that this property in litigation
belongs to the State and not to [petitioners].
Therefore, the first issue is resolved in the
negative, as the court declares the contract of
lease as invalid and void ab-initio.
On the issue of whether [respondent] and
[petitioners] are guilty of mutual fraud, the
court rules that the [respondent] and
[petitioners]
are
in pari-delicto.
As
a

consequence of this, the court must leave

them where they are found. x x x.
xxxxxxxxx
x x x. Why? Because the defendants ought to
have known that they cannot lease what does
not belong to them for as a matter of fact, they
themselves are still applying for a lease of the
same property under litigation from the
government.
On the other hand, Florentino Teves, being fully
aware that [petitioners were] not yet the
owner[s], had assumed the risks and under the
principle of VOLENTI NON FIT INJURIA NEQUES
DOLUS - He who voluntarily assumes a risk,
does not suffer damage[s] thereby. As a
consequence, when Teves leased the fishpond
area from [petitioners]- who were mere holders
or possessors thereof, he took the risk that it
may turn out later that his application for lease
may not be approved.
Unfortunately however, even granting that the
lease of [petitioners] and [their] application in
1972 were to be approved, still [they] could not
sublease the same. In view therefore of these,
the parties must be left in the same situation in
which the court finds them, under the
principle IN PARI DELICTO NON ORITOR ACTIO,
meaning[:] Where both are at fault, no one can
found a claim.
On the third issue of whether the third party
defendants are liable for demolishing the dikes
pursuant to a writ of execution issued by the
lower court[, t]his must be resolved in the

negative, that the third party defendants are

not liable. First, because the third party
defendants are mere agents of Eufracia
Colongan and Eufenio Pamplona, who are the
ones who should be made liable if at all, and
considering that the demolition was pursuant
to an order of the court to restore the
prevailing party in that Civil Case 510-T,
entitled: Eufracia Colongan v. Menchavez.
After the court has ruled that the contract of
lease is null and void ab-initio, there is no right
of the [respondent] to protect and therefore[,]
there is no basis for questioning the Sheriffs
authority to demolish the dikes in order to
restore the prevailing party, under the
principle VIDETUR NEMO QUISQUAM ID CAPERE
QUOD EI NECESSE EST ALII RESTITUERE - He
will not be considered as using force who
exercise his rights and proceeds by the force of
law.
WHEREFORE, in view of all foregoing
[evidence] and considerations, this court
hereby renders judgment as follows:
1. Dismissing the x x x complaint by the
[respondent] against the [petitioners];
2. Dismissing the third party complaint against
the third party defendants;
3. Upholding the counterclaims of the third
party defendants against the [petitioners. The
petitioners] are hereby required to pay third
party defendants the sum of P30,000.00 as
moral damages for this clearly unfounded suit;

4. Requiring the [petitioners] to reimburse the

third party defendants the sum of P10,000.00
in the concept of attorneys fees and
appearance fees of P300.00 per appearance;
5. Requiring the [petitioners] to pay to the third
party defendants the sum of P10,000.00 as
exemplary damages probono publico and
litigation expenses including costs, in the sum
of P5,000.00.[10](Underscoring in the original)
Respondent elevated the case to the Court of
Appeals, where it was docketed as CA-GR CV
No. 51144.
Ruling of the Court of Appeals
The CA disagreed with the RTCs finding that
petitioners and respondent were in pari delicto.
It contended that while there was negligence
on the part of respondent for failing to verify
the ownership of the subject property, there
was no evidence that he had knowledge of
petitioners lack of ownership.[11] It held as
follows:
x x x. Contrary to the findings of the lower
court, it was not duly proven and established
that Teves had actual knowledge of the fact
that [petitioners] merely usurped the property
they leased to him. What Teves admitted was
that he did not ask for any additional document
other than those shown to him, one of which
was the fishpond application. In fact, [Teves]
consistently claimed that he did not bother to
ask the latter for their title to the property
because he relied on their representation that
they are the lawful owners of the fishpond they

are holding for lease. (TSN, July 11, 1991, pp.

8-11)[12]

The Court shall

simultaneously.

The CA ruled that respondent could recover

actual damages in the amount of P128,074.40.
Citing Article 1356[13] of the Civil Code, it
further awarded liquidated damages in the
amount of P50,000, notwithstanding the nullity
of the Contract.[14]

In Pari Delicto Rule

Hence, this Petition.[15]

The Issues
Petitioners raise the following issues for our
consideration:
1. The Court of Appeals disregarded the
evidence, the law and jurisprudence when it
modified the trial courts decision when it ruled
in effect that the trial court erred in holding
that the respondent and petitioners are in pari
delicto, and the courts must leave them where
they are found;
2. The Court of Appeals disregarded the
evidence, the law and jurisprudence in
modifying the decision of the trial court and
ruled in effect that the Regional Trial Court
erred in dismissing the respondents Complaint.
[16]
The Courts Ruling
The Petition has merit.
Main Issue:
Were the Parties in Pari Delicto?

discuss

the

two

issues

on Void Contracts
The parties do not dispute the finding of the
trial and the appellate courts that the Contract
of Lease was void.[17] Indeed, the RTC
correctly held that it was the State, not
petitioners, that owned the fishpond. The 1987
Constitution specifically declares that all lands
of the public domain, waters, fisheries and
other natural resources belong to the State.
[18] Included here are fishponds, which may
not
be
alienated
but
only
leased.
[19] Possession thereof, no matter how long,
cannot ripen into ownership.[20]
Being merely applicants for the lease of the
fishponds, petitioners had no transferable right
over them. And even if the State were to grant
their application, the law expressly disallowed
sublease of the fishponds to respondent.
[21] Void are all contracts in which the cause,
object or purpose is contrary to law, public
order or public policy.[22]
A void contract is equivalent to nothing; it
produces no civil effect.[23] It does not create,
modify or extinguish a juridical relation.
[24] Parties to a void agreement cannot expect
the aid of the law; the courts leave them as
they are, because they are deemed in pari
delicto or in equal fault.[25] To this rule,
however, there are exceptions that permit the
return of that which may have been given

under a void contract.[26] One of the

exceptions is found in Article 1412 of the Civil
Code, which states:
Art. 1412. If the act in which the unlawful or
forbidden cause consists does not constitute a
criminal offense, the following rules shall be
observed:
(1) When the fault is on the part of both
contracting parties, neither may recover what
he has given by virtue of the contract, or
demand the performance of the others
undertaking;
(2) When only one of the contracting parties is
at fault, he cannot recover what he has given
by reason of the contract, or ask for the
fulfillment of what has been promised him. The
other, who is not at fault, may demand the
return of what he has given without any
obligation to comply with his promise.
On this premise, respondent contends that he
can recover from petitioners, because he is an
innocent party to the Contract of Lease.
[27] Petitioners allegedly induced him to enter
into it through serious misrepresentation.[28]
Finding of In Pari Delicto:
A Question of Fact
The issue of whether respondent was at fault or
whether the parties were in pari delicto is a
question of fact not normally taken up in a
petition for review on certiorari under Rule 45
of the Rules of Court.[29] The present case,
however, falls under two recognized exceptions

to this rule.[30] This Court is compelled to

review the facts, since the CAs factual findings
are (1) contrary to those of the trial court;
[31] and (2) premised on an absence of
evidence, a presumption that is contradicted
by the evidence on record.[32]
Unquestionably, petitioners leased out a
property that did not belong to them, one that
they had no authority to sublease. The trial
court correctly observed that petitioners still
had a pending lease application with the State
at the time they entered into the Contract with
respondent.[33]

The evidence of respondent himself shows that

he negotiated the lease of the fishpond with
both Juan Menchavez Sr. and Juan Menchavez
Jr. in the office of his lawyer, Atty. Jorge
Esparagoza.[36] His counsels presence during
the negotiations, prior to the parties meeting of
minds, further debunks his claim of lack of
knowledge. Lawyers are expected to know that
fishponds belong to the State and are
inalienable. It was reasonably expected of the
counsel herein to advise his client regarding
the matter of ownership.

Respondent, on the other hand, claims that

petitioners misled him into executing the
Contract.[34] He insists that he relied on their
assertions regarding their ownership of the
property. His own evidence, however, rebuts
his contention that he did not know that they
lacked ownership. At the very least, he had
notice of their doubtful ownership of the
fishpond.

Indeed, the evidence presented by respondent

demonstrates the contradictory claims of
petitioners regarding their alleged ownership of
the fishpond. On the one hand, they claimed
ownership and, on the other, they assured him
that their fishpond lease application would be
approved.[37] This circumstance should have
been sufficient to place him on notice. It should
have compelled him to determine their right
over the fishpond, including their right to lease
it.

Respondent himself admitted that he was

aware that the petitioners lease application for
the fishpond had not yet been approved.
[35] Thus, he knowingly entered into the
Contract with the risk that the application
might be disapproved. Noteworthy is the fact
that the existence of a fishpond lease
application necessarily contradicts a claim of
ownership. That respondent did not know of
petitioners lack of ownership is therefore
incredible.

The Contract itself stated that the area was still

covered
by
a
fishpond
application.
[38] Nonetheless, although petitioners declared
in the Contract that they co-owned the
property, their erroneous declaration should
not be used against them. A cursory
examination of the Contract suggests that it
was drafted to favor the lessee. It can readily
be presumed that it was he or his counsel who
prepared it -- a matter supported by petitioners
evidence.[39] The ambiguity should therefore

be resolved against him, being the one who

primarily caused it.[40]
The CA erred in finding that petitioners had
failed to prove actual knowledge of respondent
of the ownership status of the property that
had been leased to him. On the contrary, as
the party alleging the fact, it was he who had
the burden of proving through a preponderance
of evidence[41] -- that they misled him
regarding the ownership of the fishpond. His
evidence fails to support this contention.
Instead, it reveals his fault in entering into a
void Contract. As both parties are equally at
fault, neither may recover against the other.
[42]
Liquidated Damages
Not Proper
The CA erred in awarding liquidated damages,
notwithstanding its finding that the Contract of
Lease was void. Even if it was assumed that
respondent was entitled to reimbursement as
provided under paragraph 1 of Article 1412 of
the Civil Code, the award of liquidated
damages was contrary to established legal
principles.
Liquidated damages are those agreed upon by
the parties to a contract, to be paid in case of a
breach thereof.[43] Liquidated damages are
identical to penalty insofar as legal results are
concerned.[44] Intended
to
ensure
the
performance of the principal obligation, such
damages are accessory and subsidiary
obligations.[45] In the present case, it was

stipulated that the party responsible for the

violation of the terms, conditions and
warranties of the Contract would pay not less
than P50,000 as liquidated damages. Since the
principal obligation was void, there was no
contract that could have been breached by
petitioners; thus, the stipulation on liquidated
damages was inexistent. The nullity of the
principal obligation carried with it the nullity of
the
accessory
obligation
of
liquidated
damages.[46]
As explained earlier, the applicable law in the
present factual milieu is Article 1412 of the
Civil Code. This law merely allows innocent
parties to recover what they have given
without any obligation to comply with their
prestation. No damages may be recovered on
the basis of a void contract; being nonexistent,
the agreement produces no juridical tie
between the parties involved. Since there is no
contract, the injured party may only recover
through other sources of obligations such as a
law or a quasi-contract.[47] A party recovering
through these other sources of obligations may
not claim liquidated damages, which is an
obligation arising from a contract.
WHEREFORE, the Petition is GRANTED and the
assailed Decision and Resolution SET ASIDE.
The Decision of the trial court is hereby
REINSTATED.
No pronouncement as to costs.
SO ORDERED.

Sandoval-Gutierrez,
Corona,
Morales, and Garcia, JJ., concur.

Carpio-

by their attorney-in-fact, OFELIA P.

MIGUEL,
Petitioners, Promulgated:

- versus August 30, 2006

REPUBLIC OF THE PHILIPPINES,
(represented by the Lands Management
HEIRS OF THE LATE SPOUSES G.R. No.
151312

Bureau), REGIONAL TRIAL COURT

PEDRO S. PALANCA AND

OF PALAWAN (Office of the

SOTERRANEA RAFOLS VDA.

Executive Judge) and the REGISTER

DE PALANCA namely: IMELDA

OF DEEDS OF PALAWAN,

R. PALANCA, MAMERTA R. Present:

Respondents.

PALANCA, OFELIA P. MIGUEL,

X
------------------------------------------------------------------------------------- X

ESTEFANIA P. PE, CANDELARIA

P.
PUNZALAN,
Chairperson,

NICOLAS

PALANCA, CONSTANTINO
GUTIERREZ,

R. PUNO, J.,
DECISION
R. SANDOVAL-

PALANCA, EDMUNDO PALANCA, CORONA,*

LEOCADIA R. PALANCA and AZCUNA, and
OLIVERIO
R.
represented GARCIA, JJ.

PALANCA,

AZCUNA, J.:
Before this Court is a petition for review
on certiorari under Rule 45 of the Rules of
Court
seeking
the
reversal
of
the
decision[1] dated July 16, 2001, and the
resolution[2] dated December 21, 2001, of the
Court of Appeals (CA) in CA-G.R. SP No. 62081

entitled
Republic
of
the Philippines
(Represented
by
the Lands
Management
Bureau) v. Court of First Instance (CFI)
of Palawan (now Regional Trial Court), Seventh
Judicial District, Branch II presided over by
Former District Judge, Jose P. Rodriguez, et al.

The antecedent facts[3] are as follows:

On July 19, 1973, the heirs of Pedro S. Palanca,
(petitioners herein), filed an application to
bring the pieces of land they allegedly owned
under the operation of the Land Registration
Act. These are: a two hundred thirty-nine
thousand nine hundred eighty (239,980)
square meter parcel of land situated in
Barrio Panlaitan,
Municipality
of Busuanga,
Province of Palawan, as shown on plan Psu-04000074, and a one hundred seventy-six
thousand five hundred eighty-eight (176,588)
square meter land in Barrio of Panlaitan (Island
of Capari), Municipality of NewBusuanga,
Province of Palawan, as shown on plan Psu-04000073. They acquired said realties by
inheritance from the late Pedro S. Palanca, who
had occupied and possessed said land openly
and continuously in the concept of an owner
since 1934, or 39 years before the filing of said
application, and planted on said lands about
1,200 coconut trees on each land, declared the
same for taxation purposes and paid the taxes
thereof. The first parcel of land is presently
occupied by Lopez, Libarra, an encargado of
herein (petitioners), while the second is
occupied by (petitioner)Candelaria Punzalan. In

Civil
Case
No.
573
entitled Heirs
of
Pedro Palanca, Plaintiffs, vs. Alfonso Guillamac,
Defendant, for Recovery of Possession of a
Parcel of Land the Court of First Instance of
Palawan rendered a decision on March 4, 1970,
declaring (petitioners), the heirs of Pedro
S. Palanca, as the rightful possessors of the
land
at Talampulan Island, Bario of Panlaitan,
Municipality of Busuanga, Province of Palawan,
covered by Psu-04-000074, including the two
(2) hectare portion occupied and claimed by
Alfonso Guillamac.

It also appears that the jurisdictional

requirements as to notices, as prescribed by
Section 31, Act No. 496, namely publication in
the Official Gazette, were complied with.

During the initial hearing of the case, verbal

oppositions to the application were made by
the Provincial Fiscal of Palawan purportedly for
and in behalf of the Bureau of Forest
Development, the Bureau of Lands, and the
Department
of
Agrarian
Reform,
some
inhabitants of the subject properties and a
businessman
by
the
name
of
Alfonso Guillamac. The Provincial Fiscal stated
that the lands subject of the application had no
clearance from the Bureau of Forestry and that
portions thereof may still be part of the
timberland block and/or public forest under the
administration of the Bureau of Forestry and

had not been certified as being alienable and

disposable by the Bureau of Lands. He
therefore requested that the resolution on the
application be stayed pending the examination
and issuance of the required clearance by the
Bureau of Forest Development.[4] After the
lapse of three years from the date of the initial
hearing, however, no valid and formal
opposition was filed by any of the oppositors in
the form and manner required by law.
[5] Neither did the Provincial Fiscal present
witnesses from the relevant government
bureaus and agencies to support his contention
that the subject lands had not yet been cleared
for public disposition.

On the other hand, petitioners submitted the

plan and technical description of the land, a
survey certificate approved by the Bureau of
Lands and also tax declarations showing that
they have consistently paid the realty taxes
accruing on the property. Petitioners likewise
presented six witnesses in support of their
application,
namely Constantino Palanca,
Ofelia Palanca-Miguel,
Lopez Libarra,
Alejandro Cabajar,
Alfonso
Lucero
and Augustin Timbancaya.

Both Constantino Palanca and Ofelia PalancaMiguel testified that: (1) they were heirs of one
Pedro S. Palanca; (2) they, together with their
other siblings, were applicants for the
registration of two parcels of land located in
Barrio Panlaitan, Busuanga, Palawan; (3) their

father, Pedro S. Palanca, acquired ownership

over the subject properties by continuous,
public and notorious possession; (4) their
father built a house on each parcel of land and
planted coconut trees; (5) since their fathers
death, they have continued their possession
over the lands in the concept of owners and
adverse to all claimants; and (6) the properties
have been declared for taxation purposes and
the corresponding taxes religiously paid for
over forty (40) years.[6]
Lopez Libarra and
Alejandro Cabajar testified
that they knew the late Pedro S. Palanca and
worked for the latter as an overseer and
a capataz respectively in the cultivation of the
subject properties. Cabajar, in particular,
claimed that he helped clear the lands
sometime in the mid-1920s, planted upon such
lands coconut trees which are now bearing
fruit, and continued working with Pedro
S. Palanca until the latters death in 1943. He
subsequently went to work for the heirs of
Pedro S. Palanca whom he confirms now own
and manage the properties.[7]
For his part, Libarra testified that he had been
the overseer of the two coconut plantations of
the late Pedro S. Palanca since 1934. He
identified the location of the properties,
averring
that
one
plantation
is
in Talampulan, Panlaitan Island and the other
in Talampetan, Capari Island.
He
further
testified that at the time he was employed in
1934, there were already improvements in the
form of coconut trees planted in the areas, a
number of which were already bearing fruits.

His duties included overseeing and cleaning

the plantations, making copra and replanting
the area when necessary. He also claimed he
worked with Pedro S. Palanca until the latters
death in 1943 and continues to work for the
latters heirs up to the present.[8]
Also
presented
were
Alfonso
Lucero
and Augustin Timbancaya, who testified thus:

Alfonso Lucero testified that he is a Forester in

the Bureau of Forest Development, formerly
the Bureau of Forestry. He was once assigned
as the Chief of Land Classification Party No. 55
in Palawan. Presently, he is a member of the
Composite Land Classification Team No. 32 in
the
province
with
station
at
Puerto Princessa City. He has been employed
with the Bureau of Forest Development for
about 30 years, starting as a Forest Guard in
1947. As chief of Land Classification Party No.
55,
he
covered
the
territory
from
Puerto Princesa City northward up toBusuanga,
where the land in question is located. His duty
was to supervise the team that conducted the
limitation, segregation and deviation of
agricultural lands within the area. He served in
this capacity for twelve (12) years until
December
1975.
As
such,
he
issued
certifications after due classification by his
office, of alienable and disposable land for
administration by the Bureau of Lands and
eventual disposition to interested parties. He
had been in Busuanga, Palawan a number of

times and is familiar with the lands in question,

one of which is in Talampetan, CapariIsland and
the other in Talampulan, Panlaitan Island. He is
aware that the lands in question are claimed
and administered by the heirs of Pedro
S. Palanca. The improvements on the land are
at least 40 years old in his estimation. He
recalls having issued a certification of release
of this property for disposition to private
parties, but could not remember the exact date
when he did so. He identified Exhibits JJ and KK
to
be
certifications
to
the
effect
that Talampulan in Panlaitan Island
and Talampetan, a portion of Capari Island,
both in Busuanga (formerly Coron), Palawan,
are fully cultivated and mainly planted to
coconuts before World War II by herein
applicants, the heirs of Pedro S. Palanca. He is
fully convinced that the lands in question have
already been released before the war for
agricultural purposes in favor of Pedro
S. Palanca, applicants predecessor-in-interest.
Releases of agricultural lands which are done in
bulk at present was not in vogue before the
last war, for releases at that time were made
on a case-to-case basis. Under the pre-war
system, an application for a piece of land was
individually referred to the then Bureau of
Forestry
which
in
turn
conducted
a
classification of the area as to its availability,
whether it be for sale, homestead, etc. On the
basis of the Bureau of Forestry investigation, a
certification was then issued as to its
availability for the purpose for which the
application was made. The certification was
made on the basis of such application, and was

called the isolated case release or the case-tocase basis. This procedure was followed in the
case of herein applicants and there seemed to
be no reason to doubt that the area was in fact
released to herein applicants. Therefore, the
area is no longer under the jurisdiction of the
Bureau of Forest Development.

Alfonso Lucero also testified that as Chief of

Land Classification Party No. 55, he was the
one directly in charge of classification and
release of lands of public domain for
agricultural purposes. His office is directly
under the bureau chief in Manila, although for
administrative purposes he is carried with the
district forestry office in Puerto Princesa City.
The certifications he issue carry much weight
in land classification and releases in the
province unless revoked by the Manila Office.

Augustin O. Timbancaya testified that he is a

licensed geodetic engineer, formerly called a
land surveyor. His services were engaged by
applicant Ofelia P. Miguel, the representative of
the other applicants, to conduct and prepare a
land plan for two parcels of land subject of the
application. He went personally to the lands in
question. He executed Exhibit U, the Plan of
Land covered by PSU-04-000073, containing an
area of one hundred seventy-six thousand, five
hundred eighty-eight (176,588) square meters
situated
at Talampetan, Capari Island, Busuanga,
Palawan, approved by the Director of Lands on

June 25, 1973. He also identified Exhibit V, the

Plan of Land under PSU-04-000074, containing
an area of two hundred thirty-nine thousand,
nine hundred eighty (239, 980) square meters
located
at Talampulan, Panlaitan Island, Busuanga,
Palawan, which was also approved by the
Director of Lands on June 25, 1973. Both lands
are
in
barrio Panlaitan, Busuanga (formerly Coron),
Palawan, and have an aggregate total area of
four hundred sixteen thousand five hundred
sixty-eight (416,568) square meters. All these
surveys
were
properly monumented.
He
personally prepared the technical description
for both lots. He also prepared the Geodetic
Engineers Certificates and had the same
notarized by Atty. RemigioRaton, the first on
January 24, 1972 and the second on March 14,
1972. He believes that both parcels of land
have been released for agricultural purposes
because if it were otherwise, the survey plans
he executed would not have been approved by
the Director of Lands. In other words, the
approval of the Land Plans by the Director of
the Bureau of Lands indicates that the lands in
question have been previously released for
alienation and disposition. Both parcels of land
have been fully developed and the coconuts
planted thereon are about 50 years old. He has
no doubt that these lands were released for
agricultural purposes long ago.[9]

After trial, the CFI of Palawan issued a decision

on December 15, 1977 declaring petitioners as
the owners in fee simple of the two parcels of
land in question. Thereafter, Original Certificate
of Title (OCT) No. 4295 was issued in the name
of petitioners. Subsequently, out of OCT No.
4295, Transfer Certificates of Title Nos. T-7095,
T-7096, T-10396, T-10397, T-10398, T-10399, T10418, and T-10884 were issued.

On December 6, 2000, or after almost twentythree

years,
respondent
Republic
of
the Philippines filed
with
the
CA
a
petition[10] for
annulment
of
judgment,
cancellation of the decree of registration and
title, and reversion. Respondent sought to
annul the December 15, 1977 decision of the
CFI, arguing that the decision was null and void
because the two lands in question were
unclassified public forest land and, as such,
were not capable of private appropriation. In
support of this proposition, respondent
presented Land Classification Map No. 839,
Project 2-A dated December 9, 1929 showing
that the subject properties were unclassified
lands as of that date as well as a certification
dated November 24, 2000 issued by the
Community
Environment
and
Natural
Resources Office stating that the islands
of Talampulan and Capar(i) Island located in
the municipality ofBusuanga, Palawan are
within
the
unclassified
public
forest.
Respondent
likewise
drew
attention
to
Executive Proclamation No. 219 issued on July
2,
1967 which
classified
theProvince of Palawan as a National Game
Refuge and Bird Sanctuary and the small
islands off Palawan as national reserves closed
to exploitation and settlement under the
administration of the Parks and Wildlife Office,
subject only to existing private rights.[11] In
view of the fact that the properties were never
classified
as
alienable
and
disposable,
respondent argued that the CFI did not have
jurisdiction to make a disposition of the same.

In addition, respondent asserted that the

participants in the proceedings committed
perfidious acts amounting to extrinsic fraud
which is one of the grounds for the annulment
of a judgment. Respondent maintained that a
culture of collusion existed between and
among the petitioners, the Provincial Fiscal and
the ranking officer of the District Forestry
Office, Alfonso Lucero, such that the State was
deprived of the opportunity to fairly present its
case to the court.

On July 16, 2001, the CA rendered the assailed

decision, the dispositive portion of which reads:

WHEREFORE,
the
instant
petition
is GRANTED. The decision of the then Court of
First Instance of Palawan, Branch II, dated
December 15, 1977, in Land Registration Case
No. N-21, LRC Record No. N-44308 is hereby
declared NULL and VOID. Accordingly, Decree
No. N-172081 and the corresponding Original
Certificate of Title No. 4295 issued in the name
of the Heirs of Pedro S. Palanca, as well as the
subsequent Transfer Certificates of Title Nos. T7095, T-7096, T-10396, T-10397, T-10398, T10399, T-10410 and T-10884 and all
subsequent TCTsissued thereafter are also
declared NULL and VOID. Private respondents
Heirs of Pedro S. Palanca are DIRECTED to
surrender said transfer certificates of title to
public respondent Register of Deeds of
Palawan; and the latter is also DIRECTED to
cause the cancellation thereof.

SO ORDERED.[12]

Petitioners motion for reconsideration was

likewise
denied
by
the
CA
in
a
resolution[13] dated December 21, 2001.
Hence, this petition.

Petitioners contend that the CA disregarded

settled jurisprudence and applicable land laws
when it ruled that the subject properties
covered by their application for registration
were forest lands and that, consequently, the
land registration court did not have jurisdiction
to award the same to them. They opine that it
is not necessary for them to prove that the
government had expressly given a grant of the
subject properties to Pedro S. Palanca, their
predecessor-in-interest,
separate
of
the
legislative grant given to them purportedly
under Commonwealth Act No. 141 (Public Land
Act). Petitioners furthermore insist that a
particular land need not be formally released
by an act of the Executive before it can be
deemed open to private ownership, citing the
cases
of Ramos
v.
Director
of
Lands[14] and Ankron v. Government of the
Philippine Islands.[15] They likewise argue that
the CA erred in relying upon Executive
Proclamation No. 219 and upon Land
Classification Map No. 839, Project 2-A to nullify
petitioners
mother
title.
According
to
petitioners, the reversal of the CFIs decision

violated the principle of res judicata as well as

the rule on incontrovertibility of land titles
under Act No. 496.

Respondent, on the other hand, denies the

allegations
of
the
petition
in
its
comment[16] dated August 6, 2002 and
contends that (a) the claim that the subject
parcels of land are public agricultural lands by
virtue of a legislative grant is unfounded and
baseless; (b) the land registration court of
Puerto Princesa, Palawan, was devoid of
jurisdictional competence to order titling of a
portion of forest land; (c) the CA is correct in
declaring that there must be a prior release of
the subject lands for agricultural purposes; (d)
the
rules
on res judicata and
the
incontestability of Torrens titles do not find
proper applications in the exercise of the power
of reversion by the State; and (e) estoppel
and lacheswill not operate against the State.
Respondent also reiterates its contention that
collusion existed between the parties in the
proceedings below which prevented a fair
submission of the controversy, to the damage
and prejudice of the Republic.

At the outset, it must be emphasized that an

action for reversion filed by the State to
recover property registered in favor of any
party which is part of the public forest or of a
forest reservation never prescribes. Verily, nondisposable public lands registered under the
Land Registration Act may be recovered by the

State at any time[17] and the defense

of res judicata would not apply as courts have
no jurisdiction to dispose of such lands of the
public domain.[18] That being said, it must
likewise be kept in mind that in an action to
annul a judgment, the burden of proving the
judgments nullity rests upon the petitioner. The
petitioner has to establish by clear and
convincing evidence that the judgment being
challenged is fatally defective.[19]

Under the facts and circumstances of this case,

the Court finds that respondent met the
required burden of proof. Consequently, the CA
did not err in granting respondents petition to
annul the decision of the land registration
court. This petition for review, therefore, lacks
merit.

xxx

(b) Those who, by themselves or through their

predecessors-in-interest,
have
been
in
continuous,
exclusive,
and
notorious
possession and occupation of agricultural lands
of the public domain, under a bona fide claim
of acquisition or ownership, for at least thirty
years immediately preceding the filing of the
application for confirmation of title, except
when prevented by war or force majeure.
Those shall be conclusively presumed to have
performed all the conditions essential to a
government grant and shall be entitled to a
certificate of title under the provisions of this
chapter.

Section 48(b) of the Public Land Act upon which

petitioners anchor their claim states:

Sec. 48. The following-described citizens of the

Philippines, occupying lands of the public
domain or claiming to own any such lands or
an interest therein, but whose titles have not
been perfected or completed, may apply to the
Court of First Instance of the province where
the land is located for confirmation of their
claims and the issuance of a certificate of
title therefor, under the Land Registration Act,
to wit:

The above provision clearly requires the

concurrence of two things: (1) that the land
sought to be registered is public agricultural
land, and (2) that the applicant seeking
registration must have possessed and occupied
the same for at least thirty years prior to the
filing of the application. That the petitioners,
through Pedro S. Palanca, have been in
possession of the properties since 1934 is not
disputed. What is in doubt is the compliance
with the first requisite.

To reiterate, the validity of the CFI decision was

impugned on the basis of the courts lack of
jurisdiction. If the properties were alienable
public lands, then the CFI, acting as a land
registration court, had jurisdiction over them
and could validly confirm petitioners imperfect
title. Otherwise, if the properties were indeed
public forests, then the CA was correct in
declaring that the land registration court never
acquired jurisdiction over the subject matter of
the case and, as a result, its decision decreeing
the registration of the properties in favor of
petitioners would be null and void.

The reason for this is the fact that public

forests are inalienable public lands. The
possession of public forests on the part of the
claimant, however long, cannot convert the
same into private property.[20] Possession in
such an event, even if spanning decades or
centuries, could never ripen into ownership.
[21] It bears stressing that unless and until the
land classified as forest is released in an official
proclamation to that effect so that it may form
part of the disposable lands of the public
domain, the rules on confirmation of imperfect
title do not apply.[22]

In the present case, Land Classification Map

No.
839, Project 2-A[23] indicated
that
the Talampulan and Capari Islands on
which
the properties were located were unclassified

public lands as of December 9, 1929. It was by

virtue of Executive Proclamation No. 219 issued
on July 2, 1967 that these islands were
subsequently classified as national reserves.
Based on these, it becomes evident that the
subject properties have never been released
for public disposition. Obviously, from the time
that petitioners and their predecessor-ininterest were occupying the properties in 1934
until the time that an application for
registration was filed in 1973, these properties
remained as inalienable public lands.

While it is true that the land classification map

does not categorically state that the islands are
public forests, the fact that they were
unclassified lands leads to the same result. In
the absence of the classification as mineral or
timber land, the land remains unclassified land
until
released
and
rendered
open
to
disposition.[24] When the property is still
unclassified, whatever possession applicants
may have had, and however long, still cannot
ripen into private ownership.[25] This is
because, pursuant to Constitutional precepts,
all lands of the public domain belong to the
State, and the State is the source of any
asserted right to ownership in such lands and is
charged with the conservation of such
patrimony.[26] Thus, the Court has emphasized
the need to show in registration proceedings
that the government, through a positive act,
has declassified inalienable public land into
disposable land for agricultural or other
purposes.[27]

Petitioners reliance upon Ramos v. Director of

Lands[28] and Ankron v.
Government[29] is
misplaced. These cases were decided under
the Philippine Bill of 1902 and the first Public
Land Act No. 926 enacted by the Philippine
Commission on October 7, 1926, under which
there was no legal provision vesting in the
Chief Executive or President of the Philippines
the power to classify lands of the public
domain into mineral, timber and agricultural so
that the courts then were free to make
corresponding classifications in justiciable
cases, or were vested with implicit power to do
so, depending upon the preponderance of the
evidence.

As petitioners themselves admit, registration of

the properties is sought under Commonwealth
Act No. 141. Sections 6 and 7 of the Act
provide as follows:

Section
6. The
President,
upon
the
recommendation
of
the
Secretary
of
Agriculture and Commerce, shall from time to
time classify the lands of the public domain
into

(a) Alienable or disposable,

(b) Timber, and

(c) Mineral lands,

and may at any time and in a like manner

transfer such lands from one class to another,
for the purposes of their administration and
disposition.

Section
7. For
the
purposes
of
the
administration and disposition of alienable or
disposable public lands, the President, upon
recommendation
by
the
Secretary
of
Agriculture and Commerce, shall from time to
time declare what lands are open to disposition
or concession under this Act.

Based on the foregoing, the classification or

reclassification of public lands into alienable or
disposable, mineral or forest lands is the
exclusive
prerogative
of
the
Executive
Department of the government. Clearly, the
courts no longer have the authority, whether
express or implied, to determine the
classification of lands of the public domain.[30]

To the Courts mind, petitioners have failed to

present incontrovertible proof that the lands
they claimed had previously been classified as
alienable. The bare allegation of Alfonso Lucero
that a certification had been issued releasing

the properties for agricultural purposes is not

sufficient to prove this fact. The best evidence
would be the document itself which, however,
was not produced in this case. It was error for
the land registration court to have taken Mr.
Luceros testimony at face value, absent any
other evidence to conclusively prove that the
land had been released for public disposition.

Furthermore, it must be pointed out that

petitioners contention that the State has the
burden to prove that the land which it avers to
be of public domain is really of such nature
applies only in instances where the applicant
has been in possession of the property since
time immemorial. When referring to this type
of possession, it means possession of which no
person living has seen the beginning and the
existence of which such person has learned
from
the
latters
elders.[31] Immemorial
possession justifies the presumption that the
land had never been part of the public domain
or that it had been private property even
before
the
Spanish
conquest.[32] The
possession of petitioners in this case does not
fall under the above-named exception as their
possession, by their own admission, only
commenced sometime in 1934.

government that the lands claimed to have

been possessed by the applicant as owner for
more than 30 years are alienable and
disposable.[33] Petitioners failure to do so in
this case, when taken with the evidence
adduced by respondent showing that the lands
in question indeed remain part of the public
domain and form part of the national reserves,
confirms that the CFI never acquired
jurisdiction to order the registration of such
lands in favor of petitioners, and certainly
justifies their reversion to the State.

WHEREFORE, the petition is DENIED for lack of

merit. No costs.

SO ORDERED.

G.R. N

Prese

CARP
To reiterate, where there is a showing that lots
sought to be registered are part of the public
domain, the applicant for land registration
under Section 48 of Commonwealth Act No.
141 must secure a certification from the

Chair

BRION

PEREZ,
SERENO, and
REYES,

Promulgated:
JEAN TAN, ROSELLER C. ANACINTO,
CARLO LOILO ESPINEDA and DAISY
April 16,
2012 MANAOIS, represented in this
ALIADO
act by their Attorney-in-Fact,
MA. WILHELMINA E. TOBIAS,
Petitioners,

- versus

REPUBLIC OF THE PHILIPPINES,

This is a petition for review under Rule 45 of

the Decision[1] dated July 6, 2009 and
Resolution[2] dated August 12, 2010 Resolution
of the Court of Appeals (CA) in CA-G.R. CV No.
88995. The facts leading to its filing are as
follows:

On June 14, 2001, the petitioners filed with the

Regional Trial Court (RTC) of Naic, Cavite, an
application for land registration covering a
parcel of land identified as Lot 9972, Cad-459D
of
Indang
Cadastre,
situated
in Barangay Bancod, Indang, Cavite and with
an area of 6,920 square meters.[3] The
petitioners alleged that they acquired the
subject property from Gregonio Gatdula
pursuant to a Deed of Absolute Sale dated April
25, 1996; and they and their predecessors-ininterest have been in open, continuous and
exclusive possession of the subject property in
the concept of an owner for more than 30
years.[4]

Respondent.
x---------------------------------------------------------------------------------------x

RESOLUTION

REYES, J.:

After trial and hearing, the RTC issued a

Decision on July 29, 2006, granting the
petitioners application, thus:

WHEREFORE, in view of the foregoing, this

Court confirming its previous Order of general
default, decrees and adjudges Lot No. 9972
consisting of 6,920 square meters, Cad. 459-D,

Indang Cadastre and its technical description

as herein above-described situated in Brgy.
Bancod, Indang, Cavite, pursuant to the
provisions of Act 496 as amended by P.D. 1529,
as it is hereby decreed and adjudged to be
confirmed and registered in the names of Jean
Tan, of legal age, Filipino, single, with postal
address at Room 54 T. Pinpin St., Binondo,
Manila; Roseller C. Anaci[n]to, of legal age,
Filipino, single, with postal address at Moncario
Villag[e], Ampid-1, San Mateo, Rizal; Carlo Loilo
Espineda, of legal age, Filipino, with postal
address at Cluster F. Cogeo, Antipolo, Rizal and
Daisy Aliado Manaois, of legal age, Filipino and
resident of Panghulo Road, Malabon, Metro
Manila.

Once this decision becomes final, let the

corresponding decree of registration be issued
by the Administrator, Land Registration
Authority.

SO ORDERED.[5]

The CA gave due course to the appeal filed by

the Republic of the Philippines. By way of the
assailed Decision, the CA ruled that the
petitioners failed to prove that they and their
predecessors-in-interest
have
been
in
possession of the subject property for the
requisite period of 30 years. The CA posit:

We now determine if appellees have the right

to register their title on such land despite the
fact that their possession commenced only
after 12 June 1945. Records show that the
appellees possession over the subject property
can be reckoned only from 21 June 1983, the
date when according to evidence, the subject
property became alienable and disposable.
From said date up to the filing of the
application for registration of title over the
subject property on 14 June 2001, only
eighteen (18) years had lapsed. Thus,
appellees possession of the subject property
fell short of the requirement of open,
continuous and exclusive possession of at least
30 years.

Moreover, there was no adequate evidence

which would show that appellees and their
predecessors-in-interest exercised acts of
dominion over the subject land as to indicate
possession in the concept of owner. The
testimonies of appellees witnesses regarding
actual possession are belied by the absence of
evidence on actual use of or improvements on
the subject property. Appellees presented only
various tax declarations to prove possession.
However, except for the Certification, showing
payment of tax due on tax declaration for the
year 2003, there are no other evidence
showing that all the taxes due corresponding to
the rest of the tax declarations were in fact

paid by appellees or their predecessors-ininterest.

In sum, appellees were unable to prove that

they or their predecessors-in-interest have
been in possession of the subject property for
more than 30 years, which possession is
characterized as open, continuous, exclusive,
and notorious, in the concept of an
owner. Appellees failed to discharge their duty
of substantiating possession and title to the
subject land.

WHEREFORE,
the
appeal
is
hereby GRANTED and the Decision dated 29
July 2006 of the Regional Trial Court (RTC) of
Naic, Cavite, Branch 15 is REVERSED and SET
ASIDE.

SO ORDERED.[6] (citation omitted)

The petitioners moved for reconsideration but

this was denied by the CA in its August 12,
2010 Resolution.[7]

The petitioners question the conclusion arrived

at by the CA, alleging that the evidence they
presented
prove
that
they
and
their

predecessors-in-interest
have
been
in
possession and occupation of the subject
property for more than 30 years. The
petitioners claim that the following sufficed to
demonstrate that they acquired title over the
subject property by prescription:

a.
the testimony of their attorney-infact, Ma. Wilhelmina Tobias, stating that:

i.
the petitioners have been in
actual, notorious and open possession of the
subject property since the time they purchased
the same in 1996;
ii.
the petitioners have regularly
paid the taxes due on the subject property;
iii.
the petitioners predecessorsin-interest, Victorio Garcia, Felipe Gatdula and
Gregonio Gatdula, had been in possession of
the subject property for more than 30 years
and had religiously paid the taxes due thereon;
and
iv.
the
subject
property
agricultural, alienable and disposable;

is

b.
the testimony of the caretaker of
the subject property, Margarito Pena, stating
that:

i.
property;

he resides near the subject

ii.
he witnessed the execution of
the deed of sale that petitioners entered into
with Gregonio Gatdula; and
iii.
the
petitioners
and
predecessors-in-interest
have
been
in
possession of the subject property for more
than 30 years;

c.
the
testimony
of
Ferdinand
Encarnacion, a clerk in the Docket Division of
the Land Registration Authority (LRA), stating
that:

i.
no opposition to the petitioners
application was filed before the LRA;
ii.
an examiner of the LRA found
nothing wrong with the petitioners application;
and
iii.
no title covering the subject
property was previously issued;

d.
Tax Declaration Nos. 2935, 2405
and 1823 for the years 1961, 1967 and 1974 in
the name of Victorio Garcia;[8]

e.
Tax Declaration Nos. 1534 and
3850 for the years 1980 and 1985 in the name
of Felipe Gatdula;[9]

f.
Tax Declaration Nos. 22453-A and
2925 for the years 1991 and 1994 in the name
of Gregonio Gatdula;[10]

g.
Tax Declaration Nos. 21956-A,
22096-A, 22097-A and 97-05078 in the name
of the petitioners;[11]

h.
Resolution No. 69, Series of 1998,
of the Sangguniang Bayan of Indang, Cavite,
which approved the reclassification of several
lots, including the subject property, from
agricultural to residential/commercial;[12]

i.
DARCO Conversion Order No.
040210005-(340)-99, Series of 2000, issued by
the Department of Agrarian Reform on July 13,
2000, which converted several parcels of land,
including
the
subject
property,
from
agricultural to residential/commercial;[13]

j.
Certification
issued
by
the
Department of Environment and Natural
Resources (DENR) CALABARZON dated October
29, 2002, stating that the subject area falls
within the Alienable and Disposable Land

Project No. 13-A of Indang, Cavite per LC Map

3091 certified on June 21, 1983.[14]

to the registration of property and Section 14

thereof specifies those who are qualified to
register their incomplete title over an alienable
and disposable public land under the Torrens
system. Particularly:

Issue

This Court is faced with the lone issue of

whether
the
petitioners
have
proven
themselves qualified to the benefits under the
relevant laws on the confirmation of imperfect
or incomplete titles.

Our Ruling

Commonwealth Act No. 141, otherwise known

as the Public Land Act governs the
classification and disposition of lands forming
part of the public domain. Section 11 thereof
provides that one of the modes of disposing
public lands suitable for agricultural purposes
is by confirmation of imperfect or incomplete
titles. Section 48 thereof enumerates those
who are considered to have acquired an
imperfect or incomplete title over an alienable
and disposable public land.

Presidential Decree No. 1529 (P.D. No. 1529),

otherwise known as the Property Registration
Decree, is a codification of all the laws relative

Section 14. Who may apply. The following

persons may file in the proper Court of First
Instance an application for registration of title
to land, whether personally or through their
authorized representatives:

(1) Those who by themselves or through their

predecessors-in-interest have been in open,
continuous, exclusive and notorious possession
and occupation of alienable and disposable
lands of the public domain under a bona fide
claim of ownership since June 12, 1945, or
earlier.
(2) Those who have acquired ownership of
private lands by prescription under the
provision of existing laws.
(3) Those who have acquired ownership of
private lands or abandoned river beds by right
of accession or accretion under the existing
laws.
(4) Those who have acquired ownership of land
in any other manner provided for by law.

As this Court clarified in Heirs of Malabanan v.

Republic of the Philippines,[15] and Republic of
the Philippines v. East Silverlane Realty
Development Corporation,[16] Section 14(1)
covers alienable and disposable lands while
Section 14(2) covers private property. Thus, for
ones possession and occupation of an alienable
and disposable public land to give rise to an
imperfect title, the same should have
commenced on June 12, 1945 or earlier. On the
other, for one to claim that his possession and
occupation of private property has ripened to
imperfect title, the same should have been for
the prescriptive period provided under the Civil
Code. Without need for an extensive
extrapolation,
the
private
property
contemplated in Section 14(2) is patrimonial
property as defined in Article 421 in relation to
Articles 420 and 422 of the Civil Code.

Going further, it was explained in Heirs of

Malabanan and East Silverlane, that possession
and occupation of an alienable and disposable
public land for the periods provided under the
Civil Code will not convert it to patrimonial or
private property. There must be an express
declaration that the property is no longer
intended for public service or the development
of national wealth. In the absence thereof, the
property remains to be alienable and
disposable and may not be acquired by
prescription under Section 14(2) of P.D. No.
1529. Thus:

In Heirs of Malabanan, this Court ruled that

possession and occupation of an alienable and
disposable public land for the periods provided
under the Civil Code do not automatically
convert said property into private property or
release it from the public domain. There must
be an express declaration that the property is
no longer intended for public service or
development of national wealth. Without such
express declaration, the property, even if
classified as alienable or disposable, remains
property of the State, and thus, may not be
acquired by prescription.

Nonetheless, Article 422 of the Civil Code

states that [p]roperty of public dominion, when
no longer intended for public use or for public
service, shall form part of the patrimonial
property of the State. It is this provision that
controls how public dominion property may be
converted into patrimonial property susceptible
to acquisition by prescription. After all, Article
420 (2) makes clear that those property which
belong to the State, without being for public
use, and are intended for some public service
or for the development of the national wealth
are public dominion property. For as long as the
property belongs to the State, although already
classified as alienable or disposable, it remains
property of the public dominion if when it is
intended for some public service or for the
development of the national wealth. (emphasis
supplied)

Accordingly, there must be an express

declaration by the State that the public
dominion property is no longer intended for
public service or the development of the
national wealth or that the property has been
converted into patrimonial. Without such
express declaration, the property, even if
classified as alienable or disposable, remains
property of the public dominion, pursuant to
Article 420(2), and thus incapable of
acquisition by prescription. It is only when such
alienable and disposable lands are expressly
declared by the State to be no longer intended
for public service or for the development of the
national wealth that the period of acquisitive
prescription can begin to run. Such declaration
shall be in the form of a law duly enacted by
Congress or a Presidential Proclamation in
cases where the President is duly authorized by
law.

In other words, for one to invoke the provisions

of Section 14(2) and set up acquisitive
prescription against the State, it is primordial
that the status of the property as patrimonial
be first established. Furthermore, the period of
possession preceding the classification of the
property as patrimonial cannot be considered
in determining the completion of the
prescriptive period.[17]

The petitioners application is obviously

anchored on Section 14(2) of P.D. No. 1529 as
they do not claim to have possessed, by
themselves or their predecessors-in-interest,
the subject property since June 12, 1945 or
earlier. That it was thru prescription that they
had acquired an imperfect title over the subject
property is the foundation upon which the
petitioners rest their application.

Unfortunately, this Court finds the evidence

presented by the petitioners to be wanting. The
petitioners failed to demonstrate that they and
their predecessors-in-interest possessed the
property in the requisite manner, which this
Court explained as follows:

It is concerned with lapse of time in the

manner and under conditions laid down by law,
namely, that the possession should be in the
concept of an owner, public, peaceful,
uninterrupted and adverse. Possession is open
when it is patent, visible, apparent, notorious
and not clandestine. It is continuous when
uninterrupted, unbroken and not intermittent
or occasional; exclusive when the adverse
possessor can show exclusive dominion over
the land and an appropriation of it to his own
use and benefit; and notorious when it is so
conspicuous that it is generally known and
talked of by the public or the people in the
neighborhood.
The
party
who
asserts
ownership by adverse possession must prove

the presence of the essential elements of

acquisitive prescription.[18]

Tax declarations per se do not qualify as

competent evidence of actual possession for
purposes of prescription. More so, if the
payment of the taxes due on the property is
episodic, irregular and random such as in this
case. Indeed, how can the petitioners claim of
possession for the entire prescriptive period be
ascribed any ounce of credibility when taxes
were paid only on eleven (11) occasions within
the 40-year period from 1961 to 2001? In Wee
v. Republic of the Philippines,[19] this Court
stated that:

It bears stressing that petitioner presented only

five tax declarations (for the years 1957, 1961,
1967, 1980 and 1985) for a claimed possession
and occupation of more than 45 years (19451993). This type of intermittent and sporadic
assertion of alleged ownership does not prove
open, continuous, exclusive and notorious
possession and occupation. In any event, in the
absence of other competent evidence, tax
declarations do not conclusively establish
either possession or declarants right to
registration of title.[20] (emphasis supplied and
citation omitted)

In East Silverlane, it was emphasized that

adverse, continuous, open, public possession in
the concept of an owner is a conclusion of law
and the burden to prove it by clear, positive
and convincing evidence is on the applicant. A
claim of ownership will not proper on the basis
of tax declarations if unaccompanied by proof
of actual possession.[21]

While there was an attempt to supplement the

tax declaration by testimonial evidence, the
same is futile and frivolous. The testimonies of
Margarito Pena and Ma. Wilhelmina Tobias do
not merit consideration and do not make up for
the inherent inadequacy of the eleven (11) tax
declarations submitted by the petitioners. Such
witnesses did not state what specific acts of
ownership or dominion were performed by the
petitioners and predecessors-in-interest and
simply made that general assertion that the
latter possessed and occupied the subject
property for more than thirty (30) years, which,
by all means, is a mere conclusion of law. The
RTC should have tackled evidence of such
nature with a disposition to incredulity, if not
with an outright rejection.

Furthermore, the petitioners application was

filed after only (1) year from the time the
subject
property
may
be
considered
patrimonial. DARCO Conversion Order No.
040210005-(340)-99, Series of 2000, was
issued by the DAR only on July 13, 2000, which
means that the counting of the thirty (30)-year

prescriptive period for purposes of acquiring

ownership of a public land under Section 14(2)
can only start from such date. Before the
property was declared patrimonial by virtue of
such conversion order, it cannot be acquired by
prescription.
This
is
clear
from
the
pronouncements of this Court in Heirs of
Malabanan quoted above and in Republic of the
Philippines v. Rizalvo,[22] which states:

On this basis, respondent would have been

eligible for application for registration because
his claim of ownership and possession over the
subject property even exceeds thirty (30)
years. However, it is jurisprudentially clear that
the thirty (30)-year period of prescription for
purposes
of
acquiring
ownership
and
registration of public land under Section 14 (2)
of P.D. No. 1529 only begins from the moment
the State expressly declares that the public
dominion property is no longer intended for
public service or the development of the
national wealth or that the property has been
converted into patrimonial.[23]

WHEREFORE, premises considered, the instant

petition is DENIED for lack of merit. The July 6,
2009 Decision and August 12, 2010 Resolution
of the Court of Appeals areAFFIRMED.

SO ORDERED.